Euro rises above 1.1150 as Eurozone GDP exceeds expectations ahead of US midterm election

• Around 1.1175, EUR/USD trades firmer in the early European session on Monday.
• The Euro’s gains could be constrained after Fitch lowered France’s outlook from "stable" to "negative".
• Tuesday brings Americans to the polls.

Above-forecast third-quarter (Q3) Gross Domestic Product (GDP) figures from the Eurozone and Germany support the Euro (EUR) against the US Dollar (USD). EUR/USD advances towards 1.1175 in early European trading on Monday, with traders awaiting Germany’s Retail Sales figures and the US ISM Manufacturing Purchasing Managers Index (PMI) report later in the day.

At 0.4% QoQ, the Eurozone’s Q3 GDP growth exceeded the 0.2% forecast, although it slowed from 0.6% in Q2. Friday’s figures pointed to greater-than-expected economic resilience despite the effects of the Middle East war and sharply higher energy costs.

Germany also surpassed expectations: its economy expanded by 0.2% QoQ in Q3, against a market consensus of 0.1%. Growth nevertheless eased from the 0.3% recorded in Q2.

France presents a potential near-term headwind for the single currency, however. On Friday, credit ratings agency Fitch changed the country’s outlook from "stable" to "negative", warning that deteriorating public finances and political risks were weakening the prospects for debt stabilisation.

Control of Congress is at stake when Americans vote on Tuesday, with the Democratic Party seeking to wrest it from US President Donald Trump’s Republican Party. Democrats are expected to win a majority in the House of Representatives, but the Senate election’s outcome is still uncertain.

Euro finds support in limited ECB-Fed divergence as French risks restrain EUR/USD gains

A December rate increase remains a firm possibility, according to Brown Brothers Harriman’s Elias Haddad, who points to “resilient Eurozone economic activity and inflation projected to remain above target for an extended period keep a December rate hike to 2.75% firmly in play (86% priced in).” Explaining the region’s underlying resilience despite areas of weakness, he adds that “real GDP rose 0.4% q/q in Q3 vs. 0.6% in Q2, double the consensus forecast, as growth in Spain and Germany offset France’s contraction,”

The prevailing interest-rate outlook provides a foundation for the Euro, with Haddad arguing that the “bottom line: limited policy divergence between the ECB and Fed offers EUR/USD support,”. Country-specific pressures remain a potential drag, however: he warns that “France’s ongoing fiscal troubles can drive EUR/USD down to 1.1000,”.

Turning to institutional developments, BBH argues that “the ECB leadership change is unlikely to alter the near-term policy outlook and has no material implication on EUR. The ECB Governing Council is not a one-person show; 21 members have voting rights, including six Executive Board members and 15 governors of the national central banks.” A meeting of EU leaders on 26-27 November is scheduled “to discuss who will take over the ECB’s top job,”. The reported frontrunners to succeed the current president are “Spain’s Pablo Hernandez de Cos and the Netherlands’ Klaas Knot”.

Nagel’s renewed inflation warning puts Euro bulls on alert

An FXS Speechtracker score of 8.2, against a historical average of 6.9, marks a clear hawkish shift in ECB policymaker Nagel’s unusually strong inflation warning. His commitment to take “decisive action if needed” to return inflation to target strengthens expectations that monetary tightening remains a firm option should price pressures accelerate again.

A more watchful approach to inflation risk is reinforced by Nagel’s observation that consumer-price growth has accelerated again, alongside his warning that further increases “can’t be ruled out,” as energy costs rise. For the Euro, this renewed concern and willingness to respond provide support: continued upside surprises in the data could lead markets to assign a greater probability to further restrictive measures.

Technical Analysis: EUR/USD stays bearish below the 100-day SMA

Trading below its 100-day simple moving average (SMA), EUR/USD continues to show a bearish near-term bias on the daily chart. The pair also sits beneath the Bollinger Bands’ 20-period middle SMA, leaving it in the lower half of the recent volatility range. Meanwhile, a Relative Strength Index (14) reading near 40 points to weak but stabilising downward momentum, rather than outright oversold conditions.

The Bollinger middle band at 1.1195 provides the first resistance level, followed by the upper band around 1.1260. A more significant barrier lies at the 100-day SMA of 1.1425. Below the market, the lower Bollinger band at 1.1130 represents the next notable support; a decisive breach would clear the way for fresh lows within the existing bearish pattern.

(The technical analysis of this story was written with the help of an AI tool. Know more.)