Euro: Limited upside as policy diverges – Nordea

FXStreet Insights Team FXStreet

Nordea’s research suggests EUR/USD upside is constrained in coming months by interest rate differentials and relative growth. The European Central Bank is seen closer to the end of its hiking cycle than the Federal Reserve, while Eurozone data remain softer than US figures. Nordea still projects a modest EUR/USD recovery over the longer term as US exceptionalism fades.

Rate gap and growth weigh on Euro

"We see limited upside for EUR/USD in the near term, as the ECB is likely closer to the end of its hiking cycle than the Fed and growth in the euro area continues to lag behind the US."

"Our baseline is for EUR/USD to trade broadly sideways over the next few months, before gradually moving higher as US exceptionalism fades and the Fed eventually starts to cut rates ahead of the ECB."

"A break below recent lows in EUR/USD would open for a move towards the 1.03–1.05 area, while a sustained move above 1.10 would likely require a clear shift in relative data surprises in favour of the euro area or a dovish repricing of the Fed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD drops to two-week low, further below 0.7000 after RBA's less hawkish rate hike

AUD/USD drifts lower for the second straight day on Tuesday, hitting a fresh two-week low during the Asian session after the Reserve Bank of Australia's (RBA) widely expected 25 bps rate hike. The decision was far from unanimous, with three members preferring to hold rates at 4.60%. This tempers expectations of further tightening, which, along with modest US Dollar strength, weighs on the currency pair.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold holds Monday’s gains near $3,950 on US-Iran deal hopes

Gold clings to previous day’s recovery around $3,945 in the Asian trade on Tuesday, as hopes of a deal between the United States and Iran have kept oil prices under pressure. Still, the Gold price is close to its yearly low of $3,870.23 posted on Friday.

XRP and XLM slide as bearish signal grows

Ripple (XRP) and Stellar (XLM) remain under pressure on Tuesday, with bearish momentum capping recovery attempts. XRP trades around $1.25 as sellers maintain control, while XLM extends its decline below $0.162, raising the risk of a deeper correction. Meanwhile, mixed derivatives data, bearish on-chain metrics and weakening technical indicators all hint at continued downside risk for both altcoins.

What a split Congress means for the US Dollar

The United States is going to the polls on Tuesday, and much is at stake. The mid-term elections mean the renovation of roughly one-third of the Senate and all 435 of the House seats. Additionally, special elections in Florida and Ohio will be held to fill the seats vacated by US Secretary of State Marco Rubio and Vice President JD Vance.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.