Euro Falls to 1.10736 Against Dollar as Bets on U.S. Rate Hike Mount
Key Facts
The euro-dollar pair closed at 1.10736 on November 11, down from 1.11647 on November 10, as market bets on tighter U.S. monetary policy mounted after October inflation data were released. The Consumer Price Index rose 0.4% month over month, compared with a 0.6% increase in September, while core inflation remained at 0.3% for the third consecutive month. Reuters reported on November 10 that markets were pricing an 89% chance of a rate hike in December, according to the CME FedWatch tool. In a separate report, the Associated Press said the odds of a hike at the next meeting had reached 90%, while expectations for a second hike in January had topped 64%. These bets put upcoming price data and Federal Reserve officials' remarks at the top of traders' watch lists ahead of the December meeting.
October's increase in the headline index came alongside rises in several major components, with the food index up 0.5% and energy up 0.7% during the month. Energy had risen 5.2% in September, meaning the pace of monthly gains in that component slowed in October. The shelter index also rose 0.3%, accounting for more than 30% of the monthly increase in the headline index, according to the U.S. Bureau of Labor Statistics. The Consumer Price Index for All Urban Consumers stood at 337.511 points in October, the index level not seasonally adjusted, rather than the annual inflation rate. The bureau did not publish the index's 12-month change for October, as October 2025 data were not collected during the funding lapse, limiting the year-over-year comparison available in the release.
Federal Reserve officials' remarks tied market bets to concerns that price pressures could persist, while differing in their focus on inflation estimates and the rate path. Vice Chair for Supervision Michelle Bowman said on November 10 that year-over-year core personal consumption expenditures inflation was likely to have risen to 3.3% in October, citing the impact of higher energy prices and AI-related demand. Bowman had supported holding the federal funds target range at 3.75% to 4% at the October meeting. By contrast, Fed Governor Christopher Waller said a monthly core inflation reading of 0.3% or higher in October would warrant discussing a half-percentage-point increase in December. Dallas Fed President Lorie Logan said she supported two more increases of a quarter-point each, adding that the central bank could "move at a faster pace this winter."
The Federal Reserve left interest rates unchanged at its latest meeting in late October, at about 3.9%, according to the Associated Press, while Bowman said she had supported holding the target range at the time. This comes ahead of the Federal Open Market Committee meeting scheduled for December 8 and 9, with the press conference set for December 9. Before the meeting, the Bureau of Labor Statistics was scheduled to release the October Producer Price Index on November 13 at 8:30 a.m. Eastern time. Bowman was also scheduled to take part in a discussion on supervision and regulation that day at 10:50 a.m., a scheduled event on the subject. The bureau set the release of the November Consumer Price Index for December 10 at 8:30 a.m. Eastern time, after the Fed meeting.