EUR/USD Outlook: US CPI Data Strengthens Hawkish Fed Expectations

The EUR/USD pair faced another setback near resistance at 1.1260, the upper Bollinger Band on the daily chart, retreating toward the 1.1100 area as solid US economic data boosted the US dollar. Recent short-lived upside attempts—including a five-week high of 1.1274 following midterm election results and a local peak of 1.1252 driven by diplomatic statements regarding the Middle East—failed to sustain momentum. As a result, the currency pair remains locked within the 1.1130–1.1260 trading corridor for the sixth consecutive week.

US CPI Highlights Persistent Inflationary Pressures

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The latest US Consumer Price Index report provided significant support for the greenback by reinforcing hawkish Federal Reserve expectations. Headline CPI increased 0.4% month-over-month in October, exceeding the forecast of 0.3% after a 0.6% gain in September. Meanwhile, core CPI held steady at 0.3% month-over-month for the third straight month, frustrating expectations for a slowdown to 0.2%. Following the release, the market-implied probability of a 25-basis-point Fed rate hike in December rose to 90%, with a 10% chance of a 50-basis-point hike and a 50/50 chance of further tightening in January or March.

Although the October CPI report lacked year-on-year metrics due to missing statistical data from the October 2025 government shutdown, the monthly data clearly illustrated underlying inflation persistence. Energy prices rose 0.7%—a sharp slowdown from September's 5.2% jump—and food prices increased 0.5%. The shelter component rose 0.3%, accounting for roughly 30% of the overall CPI increase. Core components showed notable gains: recreation and entertainment price growth accelerated from 0.5% to 0.8%, medical care rose from 0.1% to 0.3%, auto insurance gained 0.7%, and hospital services climbed 0.8%, fully offsetting a 1.2% decline in used-car prices.

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Resilient Macro Backdrop Supports the US Dollar

The sticky inflation data reinforces a consistently strong US macroeconomic background. October Nonfarm Payrolls showed ongoing labor market resilience, while third-quarter US GDP expanded by 3.4%. Furthermore, ISM survey data highlighted persistent price pressures; the manufacturing index rose to 55.5 while services activity registered 54.5, with respective price sub-indices remaining high at 75.2 and 73.0. These figures indicate that US firms continue to face elevated input costs that pass through to consumer prices.

EUR/USD Technical Outlook

Despite the prevailing bearish impulse triggered by the CPI release, EUR/USD remains contained inside its multi-week trading range of 1.1130 to 1.1260. Initiating short positions near the lower boundary at 1.1130 entails significant risk while the range holds. A clear daily close below the 1.1130 support level is required to confirm a downside breakout and signal the start of a sustained bearish trend. Until such a breach occurs, recent price action reflects range-bound fluctuations rather than a structural trend reversal.

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