EUR/USD dives amidst US inflation resurgence, stirring the pot for potential Fed action

• US September CPI YoY ascends to 3.7%, surpassing estimates and keeping rate hike discussions alive.
• EUR/USD navigates through 1.0550 as the US Dollar gains momentum amidst inflationary pressures.
• ECB officials’ neutral stance contrasts with potential Fed policy shifts, adding tension to EUR/USD dynamics.

The Euro (EUR) tumbles more than 0.60% versus the Greenback (USD) following a hotter-than-expected US inflation report, which triggered the EUR/USD drop below the 1.0600 figure toward the 1.0550 region at the time of writing.

EUR/USD plummets below 1.0600, as US CPI data exceeds estimates, stirring the pot for potential Fed action

The US Bureau of Labor Statistics (BLS) reported that September’s Consumer Price Index (CPI) rose by 3.7% Yoy, exceeding estimates of 3.6%, and unchanged compared to the previous month. The same report revealed that core CPI rose by 4.1% annually, as analysts foreseen, trailed August’s 4.3%. Following the data, US Treasury bond yields rose, the US Dollar advanced, and equities dropped as market participants speculated that the US Federal Reserve would raise rates before the year’s end.

The CME FedWatch Tool witnessed an increase in the odds for a 25 bps lift of the Fed by the December meeting, from 26.3% to 35.7%.

Other data showed the US labor market remains hot after Initial Jobless Claims for the last week rose by 209K below forecasts of 210K, which, although coming to a tick lower, shows the jobs market is getting in balance.

Meanwhile, Fed officials remained dovish before the latest inflation data, which could trigger a reassessing of previous adopted postures before CPI release.

On the Eurozone (EU) front, central bank officials of the ECB had adopted a more neutral stance. On Wednesday, inflation figures from Germany plunged sharply, though it remains higher than the European Central Bn (ECB) 2% target.

 EUR/USD Key Technical Levels