The EUR/USD currency pair continues to experience downward pressure, trading below the 1.0950 level for the fourth consecutive day. During the Asian trading session on Monday, it hovered around 1.0920. This bearish trend is largely attributed to a combination of a stronger US dollar and a prevailing risk-averse sentiment among investors. Escalating geopolitical tensions, particularly related to conflicts in the Middle East and ongoing military activities between China and Taiwan, have intensified market anxieties, leading to increased demand for safer assets like the US dollar.
As concerns rise regarding military drills conducted by the People’s Liberation Army in the Taiwan Strait, officials from the US government have expressed serious worries. The US is closely monitoring actions from China and is coordinating with international partners about these developments. Heightened geopolitical tensions typically drive investors toward safe-haven currencies, which further applies downward pressure on the EURO .
Market participants are increasingly anticipating a 25 basis points cut in interest rates from the Federal Reserve in November. This sentiment follows the release of the US Producer Price Index last Friday, which influenced traders’ expectations for monetary policy adjustments. According to recent data, there is a nearly 87% probability for this rate cut, a notable increase from earlier projections of around 83%.
Meanwhile, the Eurozone is facing its own challenges. The European Central Bank is projected to further reduce interest rates in upcoming meetings as the region grapples with a faster-than-anticipated decrease in inflation and a sluggish economic recovery. The ECB’s dovish outlook adds to the pressure on the EURO , contributing to its recent decline against the US dollar. Overall, these factors indicate a challenging environment for the EURO as the dollar remains the preferred choice among investors in the current climate.
