Euro strengthens above 1.1150 as Eurozone GDP beats forecasts, US midterm election looms

EUR/USD strengthens to around 1.1175 in Monday’s early European session.
Fitch's revision of France's outlook to "negative" from "stable" might cap the Euro’s upside.
Americans head to the polls on Tuesday.

The EUR/USD pair gathers strength to near 1.1175 during the early European trading hours on Monday. The Euro (EUR) edges higher against the US Dollar (USD) as the Eurozone and German Gross Domestic Product (GDP) data beat forecasts in the third quarter (Q3). Traders await Germany’s Retail Sales and US ISM Manufacturing Purchasing Managers Index (PMI) reports later on Monday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Data on Friday showed that the Eurozone economy grew more than expected in Q3, indicating resilience despite the impact of the Middle East war and surging energy costs. The Eurozone GDP expanded by 0.4% QoQ in Q3, versus a 0.6% growth seen in Q2, stronger than the 0.2% expected.

Meanwhile, the German economy grew by 0.2% QoQ in Q3, compared to a rise of 0.3% in Q2. This figure came in above the market consensus of 0.1%.

However, credit ratings agency Fitch on ‌Friday revised France's outlook to "negative" from "stable", warning that worsening fiscal conditions and political risks are undermining debt stabilization prospects. This, in turn, could undermine the shared currency in the near term.

Americans will vote on Tuesday to decide whether the Democratic Party can take control of Congress from US President Donald Trump’s Republican Party. While Democrats are expected to secure a majority in the House of Representatives, the outcome of the Senate election remains uncertain.

Euro supported by limited ECB-Fed divergence but France risks cap EUR/USD upside

Brown Brothers Harriman’s Elias Haddad highlights that “resilient Eurozone economic activity and inflation projected to remain above target for an extended period keep a December rate hike to 2.75% firmly in play (86% priced in).” He notes that “real GDP rose 0.4% q/q in Q3 vs. 0.6% in Q2, double the consensus forecast, as growth in Spain and Germany offset France’s contraction,” underscoring the region’s underlying strength despite pockets of weakness.

Against this backdrop, Haddad argues that the “bottom line: limited policy divergence between the ECB and Fed offers EUR/USD support,” with the current rate outlook helping to underpin the Euro. At the same time, he cautions that “France’s ongoing fiscal troubles can drive EUR/USD down to 1.1000,” suggesting that country-specific risks could yet weigh on the currency.

On the institutional front, BBH stresses that “the ECB leadership change is unlikely to alter the near-term policy outlook and has no material implication on EUR. The ECB Governing Council is not a one-person show; 21 members have voting rights, including six Executive Board members and 15 governors of the national central banks.” EU leaders are scheduled to meet on November 26-27 “to discuss who will take over the ECB’s top job,” with “Spain’s Pablo Hernandez de Cos and the Netherlands’ Klaas Knot” reported as the frontrunners to succeed the current president.

Nagel flags renewed inflation risks and keeps Euro bulls alert

ECB’s Nagel delivers a stronger-than-usual warning on inflation, with an FXS Speechtracker score of 8.2 versus a historic average of 6.9, signaling a clear hawkish shift. The pledge that the ECB will take “decisive action if needed” to bring inflation back to target reinforces expectations that policy tightening remains firmly on the table if price pressures re-accelerate.

Nagel’s emphasis that consumer-price growth has picked up again and that further price increases “can’t be ruled out,” driven by higher energy costs, underpins a more vigilant stance on inflation risks. This combination of renewed inflation concern and readiness to act is supportive for the Euro, as markets may price in a higher probability of additional restrictive measures if data continue to surprise on the upside.

Technical Analysis: EUR/USD maintains a bearish bias under the 100-day SMA

In the daily chart, EUR/USD retains a bearish near-term bias as spot holds beneath the 100-day simple moving average (SMA). Price also trades below the Bollinger Bands 20-period middle SMA, keeping the pair anchored in the lower half of the recent volatility envelope, while the Relative Strength Index (14) around 40 suggests weak but stabilizing downside momentum rather than outright oversold conditions.

On the topside, initial resistance is aligned with the Bollinger middle band at 1.1195, ahead of the upper Bollinger band near 1.1260, while a more substantial cap emerges at the 100-day SMA at 1.1425. On the downside, the lower Bollinger band at 1.1130 offers the next meaningful support, and a decisive break beneath this floor would reopen the path toward fresh lows within the prevailing bearish setup.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.