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EUR/USD slides as Fed hike odds rise ahead of Trump-Xi meeting

Investors raised the probability of a back-to-back Fed hike in October to 70%, while eurozone price data failed to boost the euro despite stronger-than-expected flash PMIs.

Reported · Written up by our desk · Major Pairs

The US dollar extended gains against major peers, with EUR/USD falling toward the 1.1350 area as investors increased expectations for further Fed rate hikes, Action Forex reported. The move was driven by upbeat S&P Global flash PMI data for the US and hawkish remarks from Fed Governor Barr.

According to preliminary S&P Global figures, the US composite PMI rose to 58.4 in September, marking a fourth straight month of growth and the fastest pace since July 2021. The data also pointed to inflation pressures intensifying, with the rate of inflation reaching its highest level since October 2022.

Action Forex said market participants now see a 70% chance of a back-to-back rate hike in October, with another hike priced in by January. Overall, excluding the most recent 25 basis point increase, investors anticipate an additional 92 basis points of rate hikes by the end of 2027.

In the eurozone, flash PMI results were also better than expected but did not meaningfully lift the euro, with hawkish ECB tightening expectations already reflected in pricing, the outlet added. Traders also flagged the upcoming meeting between US President Trump and Chinese President Xi Jinping as the next potential catalyst, particularly on topics like trade, tariffs, rare-earth exports, and AI.

Latest closeEUR/USD 1.138 ▼0.6%

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