Euro gains against US Dollar as ECB rate hike bets lend support - Scotiabank

A softer US Dollar (USD) following the US midterms has supported the Euro (EUR), which is trading firmer near 1.1240 after easing slightly from intraday highs around 1.1265, according to Scotiabank analysts. While technicians retain a broadly positive outlook, they emphasise that a clear break above 1.1275 is needed. Eurozone Consumer Price Index (CPI) inflation was confirmed at 4.0% year-on-year, as several European Central Bank (ECB) officials indicated that an interest rate increase in December is likely.

Do ECB signals point to a December rate hike?

"The EUR is firmer but trading a little off the peaks made earlier in the day around the 1.1265 zone. EUR gains are broadly in line with the softer USD tone that has emerged in the wake of the US mid-term results."

"Eurozone October CPI was confirmed at 4.0% Y/Y (2.5% for core) while final Eurozone Services and Composite PMIs were marked down slightly to 51.4 and 51.7 respectively on downward revisions to French data."

"ECB Governor Nagel said Tuesday the inflation picture has worsened and that policy would probably have to be tightened in December. His colleague Sleijpen said the Iran shock was more persistent than had been thought – although there were no second-round inflation effects visible at this point – while Governor Kocher said a December rate hike was likely unless circumstances change."

"Neutral/bullish – Firm gains intraday have stalled just shy of noted resistance at 1.1275. Positive price action overall this week so far plus the resilient EUR support in the low 1.11 zone in recent weeks maintain a broadly positive technical undertone for the EUR. But spot needs a clear push above 1.1275 to progress higher and take a run at 1.1350/1.14."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)