The euro continued its upward momentum against the US dollar on Wednesday, climbing to $1.1653 as traders increased bets on an imminent rate cut from the US Federal Reserve.
The EUR/USD pair rose for the fifth consecutive session, marking its longest rally in several months. Although the pair briefly surpassed $1.1665, it struggled to maintain the momentum, hovering just below that level as dollar selling intensified across global markets.
The US dollar traded mixed against major G10 currencies as investors reacted to cautious remarks from Japanese officials regarding exchange rate movements. The greenback’s recent retreat followed a weeklong rally against the yen, which ended after a positive meeting between US President Donald Trump and Japan’s Prime Minister Takaichi.
European traders are now anticipating the European Central Bank’s (ECB) upcoming rate decision, along with Germany’s flash inflation report, third-quarter GDP data, and labor market figures scheduled for October 30.
Elsewhere, GBP/USD traded lower, approaching 1.3250 as investors awaited the Bank of England’s consumer credit data and financial statistics. The USD/JPY pair fell to multi-day lows of 151.70, while Japan’s consumer confidence report is expected to provide further direction.
In commodities, West Texas Intermediate (WTI) crude slipped below $60 per barrel, and gold prices retreated to a four-week low near $3,870 per ounce, with silver making a mild recovery from five-week lows.
Market analysts widely expect the Federal Reserve to cut interest rates by 25 basis points after weaker-than-expected September Non-Farm Payrolls data, which showed job growth of only 95,000. With core inflation now easing to 2.8%, the Fed appears justified in adopting a more dovish stance.
“This scenario mirrors the Fed’s 2019 policy pivot that triggered prolonged dollar weakness,” analysts at Marc to Market noted. They added that traders might consider positioning for further dollar declines, with potential breaks below the 98.50 support level on the US Dollar Index (DXY).
As the ECB decision approaches, implied volatility in EUR/USD options remains elevated, with the pair testing its 100-day moving average. Analysts believe the dollar’s softness could persist, while a dovish Fed tone may lend short-term support to precious metals.
Despite recent profit-taking, gold’s dip could present buying opportunities for long-term investors anticipating renewed upside once monetary policy eases further.
