Traders price in an 89% chance of a December Fed rate hike, lifting the USD as geopolitical uncertainty adds safe-haven demand.
The EUR/USD pair dropped to 1.1425 in early European trading Tuesday, pressured by a stronger US Dollar. Markets reacted to a hawkish Federal Reserve stance, with Chair Kevin Warsh emphasizing price stability as the central bank’s priority after last week’s rate decision held rates at 3.50%-3.75%.
Fed rate hike odds for December surged to 89% from 61% pre-FOMC, according to CME FedWatch. Meanwhile, uncertainty over a US-Iran peace deal bolstered the Greenback’s safe-haven appeal, despite mixed signals from Washington and Tehran on nuclear monitoring commitments.
Traders await preliminary PMI data from Germany, the Eurozone, and the US later Tuesday, which could further influence Fed policy expectations and currency movements.