Listen to the article here:
Key Points
The EUR/USD pair rallied on Monday, with the euro climbing 0.62% to $1.0901 as the U.S. dollar lost ground. The dollar’s recent weakness is driven by a tighter U.S. presidential race, as recent polling shows Kamala Harris edging ahead in some battlegrounds, adding pressure to the greenback.
The election uncertainty is adding layers of complexity to EUR/USD movements, as market participants remain wary of sudden policy shifts that could follow a close or contested result.
Picture: EURUSD tests resistance at 1.0900 as momentum stalls, with traders eyeing potential breakout or pullback, as seen on the VT Markets app.
We’re seeing upward movement with EUR/USD, closing at 1.08906 with an intraday high of 1.09048 and a low of 1.08698. This upward push reflects some bullish sentiment, though the currency pair remains within a tight range, suggesting consolidation rather than a clear breakout.
The current political landscape and anticipated Fed rate cuts later this week are creating a cautious but reactive environment for the EUR/USD.
In recent days, EUR/USD has bounced back after a period of dollar strength. The U.S. dollar’s rally has eased as election polls show a narrowing margin between Harris and Trump, with some indicators even favouring Harris in key states.
This shift has removed some of the “Trump trade” momentum, as traders had initially priced in Trump’s stance on inflation and tariffs as likely to boost the dollar.
With this rally tapering, EUR/USD has found room to rebound, with the potential for further gains if dollar softness persists through the election.
See also: Dollar Dips on Uncertain US Election, Possible Fed Rate Cut
IG’s Tony Sycamore notes that the odds for a Republican sweep have fallen to around 36%, from a prior 48%, shifting market sentiment in favour of the euro and other major currencies.
For EUR/USD, this means a short-term reprieve from the downtrend, though any post-election clarity could see rapid adjustments in either direction.
Aside from the election, EUR/USD traders are closely eyeing the upcoming Federal Reserve meeting, where a 25-basis-point rate cut is anticipated.
This expectation is mostly priced in, but any dovish language from Fed officials could push the dollar lower, potentially lifting EUR/USD further.
If the Fed hints at a slower pace of future cuts, however, the dollar might stabilise, capping gains for EUR/USD.
Across the Atlantic, the euro is also navigating mixed signals from the Eurozone. China’s NPC Standing Committee meeting, expected to outline further stimulus measures, could add an extra layer of support for the euro as improved global trade prospects may benefit the Eurozone’s export-heavy economy.
However, domestic factors, including recent data showing stagnant growth in the region, continue to weigh on the euro.
The ECB’s recent 25-basis-point cut has set a cautious tone for Eurozone rates, with officials like Christine Lagarde signalling a prudent approach to further adjustments.
Any drastic moves in EUR/USD may be tempered by the Eurozone’s challenges.
With EUR/USD responding to both economic data and election developments, this week promises to be crucial for the pair. As the U.S. heads to the polls and central banks take the stage, the path forward for EUR/USD is anything but straightforward, with traders on high alert for sudden moves.
Start trading now — click here to create your live VT Markets account.
Official partners:
