Euro returns to its October low as the ECB looms

• EUR/USD rebounds from its 14 October low, ending a five-session losing streak.
• A 10-2 vote kept Fed rates unchanged, while Fed Governor Cook's first dissent favoured a hike.
• Friday's third-quarter euro area GDP release is expected to show growth easing to 0.2%.

EUR/USD is heading for its first advance in six sessions, recovering to around 1.1150 ahead of Thursday's European Central Bank (ECB) decision. The pair remains only a little above a low tested on both 14 October and Wednesday. That second test, just above 1.1100, came after five consecutive sessions of losses.

Expectations of a December Fed hike rose to about 81% from 75% after the central bank left rates unchanged in a 10-2 vote, affecting the US side of EUR/USD's interest-rate differential. Cleveland Fed President Hammack and Fed Governor Cook backed a quarter-point increase; for Cook, it was her first dissent since joining in 2022. The policy statement also raised its assessment of US growth from a solid pace to a strong one.

EUR/USD reached its session high during Fed Chair Warsh's press conference. Warsh said he does not believe in forward guidance outside a crisis and noted that market-determined interest rates, which drive the Dollar's trading, have moved lower. The pair's only rise in six sessions thus coincided with two votes for a rate hike and a stronger Fed assessment of US growth.

What Could the Upcoming Data and ECB Decision Signal?

The euro side of the pair's interest-rate differential will be shaped by Thursday's ECB decision at 13:15 GMT, with the deposit rate expected to remain at 2.5%. At 13:45 GMT, ECB President Lagarde will take questions. Friday then brings third-quarter euro area growth data at 10:00 GMT, with a forecast of 0.2%, down from 0.6%.

Just ahead of the ECB announcement, Thursday's 12:30 GMT release of third-quarter US Gross Domestic Product (GDP) is expected to show annualised growth of 3.2%, up from 2.2%. For the same quarter, the forecasts therefore point to faster growth on the US side of the pair and a slowdown on the euro side.

What Do the EUR/USD Charts Show?

A trading range capped just above 1.1250 has contained EUR/USD since early October, marking the latest phase of its retreat from the August peak just above 1.1700. Since mid-September, the pair has remained below its 50-day Exponential Moving Average (EMA), which now lies just under 1.1350. The 200-day EMA, meanwhile, stands just under 1.1500.

Daily EUR/USD chart