EUR/USD ended the week almost flat near 1.1200 after failing to hold a push towards 1.1260, even as the US dollar softened. On a broader view, spot has shed about six big figures from summer highs above 1.1700, leaving the monthly chart pointing to a second successive decline. Attention now turns to preliminary inflation data from Germany and the Eurozone, alongside meetings from the European Central Bank and the Federal Reserve, with both expected to keep policy steady; the Fed Funds Target Range is seen unchanged at 3.75%–4.00%, while US PCE inflation and another estimate of Q3 GDP Growth will also be parsed.
Geopolitical Risks and Inflation Outlook
Geopolitical strains around the Strait of Hormuz and the Russia-Ukraine war have fed into higher energy prices, raising the risk that external cost pressures become embedded in Eurozone inflation. Markets are pricing about 18 basis points of additional ECB tightening by year-end, while the ECB’s September survey showed 12-month inflation expectations ticking up to 3.1% from 3.0%, with the three-year measure steady at 2.9% and the five-year at 2.5%.
Market Positioning and Sentiment
Positioning is heavily bearish: CFTC data showed non-commercial net shorts near 137.6K contracts, open interest around 874.6K, and speculative exposure at -15.73% versus -11.41%, yet options were less negative, with the one-month 25-delta risk reversal at -0.531 and EUR/USD down 1.45% over the month as risk reversals rose 0.114.
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