Above 1.1150: Euro gains as Eurozone GDP tops forecasts and US midterm election approaches

1.1175 is within reach as EUR/USD advances in early European trading on Monday.
The Euro’s gains might be limited after Fitch changed France’s outlook from "stable" to "negative".
Tuesday brings US voters to the ballot box.

1.1175 is the level EUR/USD approaches early in Monday’s European session. Better-than-forecast third-quarter (Q3) Gross Domestic Product (GDP) figures for the Eurozone and Germany are lifting the Euro (EUR) against the US Dollar (USD). Attention now turns to Germany’s Retail Sales and the US ISM Manufacturing Purchasing Managers Index (PMI), both due later on Monday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

At 0.4% QoQ, Eurozone GDP growth in Q3 exceeded the 0.2% forecast but slowed from 0.6% in Q2. Released on Friday, the figures pointed to economic resilience despite the Middle East war and sharply higher energy costs.

Germany also outperformed expectations. Its economy expanded 0.2% QoQ in Q3, above the 0.1% market consensus, following growth of 0.3% in Q2.

France presents a potential near-term headwind for the single currency. On Friday, credit ratings agency Fitch changed the country’s outlook from "stable" to "negative", warning that deteriorating fiscal conditions and political risks were weakening prospects for debt stabilisation.

Control of Congress is at stake when Americans vote on Tuesday, with the Democratic Party seeking to wrest it from US President Donald Trump’s Republican Party. Democrats are expected to win a majority in the House of Representatives. The Senate result, however, remains uncertain.

EUR/USD support from limited ECB-Fed divergence faces French fiscal risks

A December rate increase remains a live prospect, according to Elias Haddad of Brown Brothers Harriman. He highlights that “resilient Eurozone economic activity and inflation projected to remain above target for an extended period keep a December rate hike to 2.75% firmly in play (86% priced in).” The region’s underlying resilience, despite areas of weakness, is reflected in his observation that “real GDP rose 0.4% q/q in Q3 vs. 0.6% in Q2, double the consensus forecast, as growth in Spain and Germany offset France’s contraction,”

Haddad sees the current interest-rate outlook as a source of support for the Euro, arguing that the “bottom line: limited policy divergence between the ECB and Fed offers EUR/USD support,” Yet country-specific pressures remain a threat. He warns that “France’s ongoing fiscal troubles can drive EUR/USD down to 1.1000,”

Changes at the top of the ECB are not expected to shift the immediate policy outlook. BBH stresses that “the ECB leadership change is unlikely to alter the near-term policy outlook and has no material implication on EUR. The ECB Governing Council is not a one-person show; 21 members have voting rights, including six Executive Board members and 15 governors of the national central banks.” A meeting of EU leaders on 26-27 November is scheduled “to discuss who will take over the ECB’s top job,” The reported leading candidates to succeed the current president are “Spain’s Pablo Hernandez de Cos and the Netherlands’ Klaas Knot”

8.2 Speechtracker score: Nagel’s inflation warning sharpens Euro focus

An FXS Speechtracker score of 8.2, against a historical average of 6.9, marks a clear hawkish shift in ECB’s Nagel’s latest inflation warning. His message is stronger than usual. By pledging “decisive action if needed” to return inflation to target, he reinforces expectations that renewed price pressures could keep monetary tightening firmly on the agenda.

Higher energy costs underpin Nagel’s warning that further price increases “can’t be ruled out,” alongside his observation that consumer-price growth has accelerated again. His heightened vigilance and willingness to act support the Euro. Should data continue to exceed expectations, markets may assign a greater probability to further restrictive measures.

100-day SMA caps EUR/USD: Technical Analysis remains bearish

Below the 100-day simple moving average (SMA), EUR/USD continues to show a bearish near-term bias on the daily chart. The pair also sits beneath the Bollinger Bands’ 20-period middle SMA, leaving it in the lower half of the recent volatility range. With the Relative Strength Index (14) near 40, downside momentum looks weak but is stabilising, rather than signalling outright oversold conditions.

Resistance starts at 1.1195, where the Bollinger middle band lies, followed by the upper band near 1.1260. The 100-day SMA at 1.1425 presents a stronger barrier. Support next sits at the lower Bollinger band of 1.1130. A decisive break below that level would clear the way for fresh lows within the prevailing bearish structure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Euro: key questions answered

The Euro: which currency is it?

20 European Union countries use the Euro as members of the Eurozone. Globally, only the US Dollar is traded more actively. The Euro represented 31% of all foreign exchange transactions in 2022, with average daily turnover exceeding $2.2 trillion. The world’s busiest currency pair, EUR/USD, accounts for an estimated 30% of all transactions. Next are EUR/JPY at 4%, EUR/GBP at 3% and EUR/AUD at 2%.

The ECB: its role and influence on the Euro

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and directing monetary policy. Price stability is its core mandate, pursued by containing inflation or encouraging growth. Adjustments to interest rates are its main policy instrument. Higher rates, or expectations of increases, generally support the Euro; lower rates tend to have the opposite effect. Monetary policy is decided by the ECB Governing Council at eight meetings each year. Those decisions rest with the heads of Eurozone national banks and six permanent members, among them ECB President Christine Lagarde.

Inflation figures: implications for the Euro

2% is the ECB’s inflation target. Eurozone price data, tracked through the Harmonised Index of Consumer Prices (HICP), provide an important economic measure for the Euro. Inflation above expectations, particularly when it exceeds that target, obliges the ECB to increase interest rates to regain control of prices. When regional interest rates are relatively high compared with those elsewhere, the Euro generally benefits. The higher rates make the region a more attractive destination for global investors’ funds.

Economic indicators: what drives the Euro’s response?

Economic releases can move the Euro by revealing the health of the economy. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys all help shape the single currency’s direction. Economic strength supports the Euro by drawing in foreign investment and potentially prompting the ECB to raise interest rates, which would directly strengthen the currency. Weak data, by contrast, are likely to weigh on the Euro. Particular weight is given to releases from the euro area’s four largest economies, Germany, France, Italy and Spain. Together, they represent 75% of the Eurozone economy.

Trade Balance: why it matters for the Euro

The Trade Balance is another important release for the Euro. Over a specified period, it measures export earnings against expenditure on imports. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers purchase those goods, lifting its value. A positive net Trade Balance therefore supports a currency, while a negative balance has the reverse effect.