Euro drifts toward the bottom of its range as US rate bets climb

Five weeks into a 1.1100-1.1300 range, the Euro is still inside it after US consumer prices beat forecasts, though back in the lower half. It dropped to just below 1.1150, giving back nearly all of Monday's climb, and has edged back above that level.

Core US consumer prices rose 0.3% in October against a 0.2% forecast. Dallas Fed President Logan said two more quarter-point hikes are needed before a pause, and traders give a second one by January about 74%. Two hikes would put US rates 1.75-2.00 percentage points above the European Central Bank (ECB) deposit rate of 2.50%, unless the ECB hikes too.

ECB Chief Economist Lane said he'd set a high bar for signalling where ECB rates go next, on a day two Fed officials put a size on theirs. Eurozone inflation hit a three-year high of 4% in October, and money markets price two ECB hikes by mid-2027, which would narrow that gap for the Euro.

On the calendar

ECB President Lagarde speaks at 09:45 GMT on Wednesday and 19:30 GMT on Thursday, and ECB Executive Board member Schnabel at 07:10 GMT on Friday. Friday also brings updated Eurozone Gross Domestic Product (GDP) for the third quarter at 10:00 GMT, forecast at 0.4% growth, the same as the first reading. ECB President Lagarde's remarks and that figure bear on whether the ECB hikes in December too.

In the US, Cleveland Fed President Hammack, a voter this year, speaks on Thursday at 14:00 GMT. Friday's core producer price figure at 13:30 GMT is forecast to hold at 5% from a year earlier, as in September, with the Fed's December 9 hike already priced.

On the charts

The Euro moved into this range after a drop of about 5% from its late-August high near 1.1700. It has turned lower just short of the top repeatedly, most recently on November 5, and its October 14 and October 29 lows held just above the bottom.

EUR/USD daily chart