The EUR/USD pair faced intense selling pressure on Wednesday, plummeting to its lowest level since early July, around the 1.0720-1.0715 region during the Asian session. While the pair managed a slight recovery in the final hour, it remained down 1.50% for the day, trading just above the mid-1.0700s.
US Dollar Strengthens Amid Trump Election Optimism
The US Dollar (USD) saw aggressive buying, hitting a four-month high, as rising expectations of a victory for former President Donald Trump weighed on the Euro. The potential for a Republican sweep in the US election has fueled concerns over inflationary tariffs, rising deficits, and a less dovish Federal Reserve (Fed). These factors have pushed US Treasury bond yields higher, with the yield on the 10-year US government bond surging by over 15 basis points to 4.44%, its highest level since July 2.
ECB’s Less Dovish Stance Could Limit EUR/USD Losses
Despite the pressure on the EUR/USD pair, the risk-on sentiment in global equity markets has somewhat capped the USD’s gains. This has helped limit further losses for the Euro. Additionally, the Eurozone’s October inflation data showed a rise to 2%, and better-than-expected GDP growth from major Eurozone economies suggests that the European Central Bank (ECB) may follow through with its expected 25 basis point rate cut in December.
However, with EUR/USD holding below the key 1.0800 level, the pair is still at risk of further declines. A sustained break below this level could signal a continued bearish outlook for the Euro, suggesting the path of least resistance for the pair remains to the downside.
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