EUR/USD Slides for Five Days Straight ahead of Double Central Bank Decisions
Market Overview
The EUR/USD currency pair has been on a downward trend, trading around 1.1125 as of October 28, 2026. This marks the fifth consecutive day of losses for the euro against the US dollar, as traders adjust their positions in anticipation of upcoming decisions from both the Federal Reserve (Fed) and the European Central Bank (ECB).
Currently, the euro is positioned to be the worst-performing developed-market currency for the month of October.
Key Drivers of Movement
The primary factor contributing to the euro's decline is concerns regarding France's public finances, which have raised doubts among investors. Additionally, a stronger US dollar has compounded the euro's struggles. The dollar has regained strength as previous concerns related to artificial intelligence (AI) have diminished, allowing traders to refocus on the Fed's interest rate outlook.
Market Data and Reactions
The US Dollar Index, which measures the dollar's performance against a basket of six major currencies, is trading around 102.20, nearing a two-week high. Market participants are keenly awaiting the Fed's policy statement and comments from Chair Kevin Warsh, which are expected to clarify the likelihood of a rate hike in December. Current market pricing suggests an 80% probability of such a hike, driven by persistent inflation above the Fed's target and ongoing geopolitical risks in the Middle East.
Broader Market Implications
The ECB's cautious stance contrasts sharply with the firm expectations surrounding the Fed. Analysts from Brown Brothers Harriman suggest that while the ECB has the flexibility to wait, a rate hike in December remains a possibility. They anticipate that turmoil in the French bond market will dominate ECB President Christine Lagarde's press conference, and while reassurance regarding contagion risks could provide some support for the euro, the ongoing fiscal issues in France leave the EUR/USD pair vulnerable to further declines, potentially towards the 1.1000 level.
What Forex Traders Should Watch
- The Fed's decision scheduled for 02:00 UTC+8 on October 29, 2026, followed by Warsh's press conference at 02:30 UTC+8.
- US third-quarter GDP and PCE inflation data set to be released at 20:30 UTC+8 on October 29, 2026.
- The ECB's decision at 21:15 UTC+8 on October 29, 2026, along with Lagarde's press conference.
- Developments in the French bond markets.