EUR/USD Falls Below 1.11 as Fed Rate-Hike Bets Lift the Dollar

Key Takeaways

• EUR/USD fell below 1.1100 on November 11, reaching its lowest level since May 2025 as the dollar strengthened.
• Stronger-than-expected US inflation and Christopher Waller’s comments increased attention on a possible 50-basis-point December Fed hike.
• European policy expectations and French fiscal concerns add pressure, with 1.1000 in focus ahead of Friday’s US PPI release.

Euro Breaks Below 1.11 as Dollar Strengthens

The euro fell to an 18-month low against the US dollar on Wednesday, November 11, as investors increased bets on further Federal Reserve tightening following stronger-than-expected inflation data.

EUR/USD traded around 1.1095, down approximately 0.66% at the reported snapshot, after reaching an intraday low near 1.1084. The move took the pair below 1.1100 and to its weakest level since May 2025.

The decline reflects a shift in expectations for relative monetary policy. Investors are weighing a potentially more forceful Fed response against doubts over how far the European Central Bank will raise borrowing costs.

With the pair already below 1.1100, attention has moved to whether the euro can recover that level or whether selling pressure continues towards 1.1000.

US Inflation Keeps Pressure on the Federal Reserve

US consumer prices rose 0.4% in October from the previous month, while the core measure, excluding food and energy, increased 0.3%.

Both readings exceeded surveyed expectations of 0.3% and 0.2%, respectively. Although headline inflation slowed from September’s 0.6% increase, the figures provided less evidence of cooling price pressures than markets had anticipated.

Core CPI rose 0.3% for a third consecutive month. That persistence matters because policymakers are looking for sustained progress towards price stability rather than an improvement concentrated in volatile categories.

For currency markets, the significance lies in how the data change the expected interest-rate path. If investors anticipate higher US rates for longer, dollar assets may become more attractive relative to alternatives.

The reaction consequently depends on the gap between the published figures and expectations. A slower headline reading can still support the dollar when the slowdown is smaller than forecast.

Waller Opens the Door to a Larger December Hike

Fed Governor Christopher Waller strengthened the case for further tightening in a November 10 speech delivered before the CPI release.

He indicated support for a 25-basis-point increase in December even if inflation improved. He also said policymakers should consider a 50-basis-point increase if October core CPI rose around 0.3% or more.

The subsequently published figure met that condition, bringing a larger move into market discussion.

Waller’s position remains the view of one policymaker. His comments do not establish a collective Fed decision, and additional data could change the policy debate before December.

His speech also linked persistent inflation risks to broader economic conditions, including strong activity and investment associated with the AI buildout. This reinforced the message that the recent pause in rate increases did not necessarily signal the end of tightening.

Treasury Yields Reinforce Dollar Demand

The CPI report and Waller’s remarks triggered a sell-off in US government bonds on Tuesday, pushing yields higher. Two-year Treasury yields, which are particularly sensitive to monetary-policy expectations, recorded their largest increase since early April 2025.

Higher expected US yields can support the dollar by increasing the prospective return on dollar-denominated assets.

However, the timing matters. US bond markets were closed for Veterans Day on Wednesday, so the euro’s decline followed Tuesday’s yield adjustment rather than a fresh regular-session Treasury sell-off that day.

Market pricing also distinguishes between the likelihood of any rate increase and the size of that increase. A December hike can be almost fully priced while a half-point move remains a minority expectation.

Once a quarter-point increase is widely anticipated, further dollar gains may require stronger evidence for a larger move or a more prolonged tightening cycle.

ECB Expectations and French Risks Weigh on the Euro

European developments are adding to the pressure. Market expectations for ECB rate increases have been trimmed following the retreat in oil prices, while French debt concerns remain a source of uncertainty.

This does not imply that markets expect the ECB to stop tightening immediately. The debate increasingly concerns how much additional tightening could follow December.

Rabobank strategist Jane Foley has questioned whether the ECB will raise rates as far as markets previously expected in 2027. The bank maintains a three-month EUR/USD forecast of 1.1000.

That outlook reflects a relative assessment of the dollar and euro rather than a guarantee that the exchange rate will reach a particular level.

French fiscal and political uncertainty creates an additional consideration. Concerns about public finances and future cooperation within the European Union could limit confidence in the euro even when individual economic releases improve.

EUR/USD Levels to Watch Ahead of US PPI

The immediate reference area is 1.1100. A sustained recovery above it would indicate that the initial breakdown is losing momentum, while continued trading below it would keep attention on the recent low near 1.1084.

Further weakness would bring the psychological 1.1000 level into focus. Rabobank’s forecast supports its relevance as an outlook reference, but a forecast target should not be treated as evidence that buying interest will necessarily emerge there.

The next major scheduled catalyst is October’s US Producer Price Index, due on Friday, November 13, at 8:30 a.m. Eastern Time.

A stronger-than-expected report could reinforce concerns about persistent inflation and support further dollar demand. A softer reading could prompt some reversal in rate expectations and offer the euro temporary relief.

The response will depend on the report’s composition and how it compares with market expectations. Fed commentary could also influence whether investors interpret the data as supporting a quarter-point or half-point increase.

EUR/USD remains under pressure from a stronger dollar and uncertainty over Europe’s policy outlook. A lasting recovery would require evidence that the relative interest-rate outlook is becoming less favourable to the dollar, while another upside inflation surprise could keep 1.1000 in view.

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