Fed to cease rate hikes

The Euro (EUR) is showing indications of renewed vulnerability against the US Dollar (USD), causing EUR/USD to decline to the 1.0520 area after three consecutive sessions of gains on Monday.

In contrast, the Greenback is regaining the ground it had previously lost and returning to the 106.50 region, as observed through the USD Index (DXY). This resurgence is a response to the prevailing risk-off sentiment in the global markets at the start of the week.

Regarding monetary policy, investors anticipate that the Federal Reserve (Fed) will maintain its interest rates at their current levels for the remainder of the year. Simultaneously, there is speculation in the market about the possibility of the European Central Bank (ECB) pausing its policy, despite inflation levels surpassing the bank's target and mounting concerns about the potential for a future recession or stagflation in the European region.

A look at the speculative community notes that speculators trimmed further their EUR net longs positions to levels last seen in late October 2022 in the week to October 3, as per the latest CFTC Positioning report.

On the domestic calendar, Industrial Production in Germany contracted at a monthly 0.2% in August, while the Investor Confidence eased a tad to -21.9 when tracked by the Sentix Index for the current month.

The US docket will be empty on Columbus Day holiday. Around the Fed, Dallas Fed President Lorie Logan (voter, hawk) reiterated that the US labour market remains tight and suggested it is still premature to talk about rate cuts.