Despite the current recovery attempts, the short-term and broader outlook for the euro remains downbeat. First, the Fed was not as dovish as expected, which reduces the possibility of another rate cut till the end of the year. Second, German economy is on the verge of a recession, and fresh data confirm these fears. In particular, producer prices contracted 0.5% month on month in August and rose 0.3% from a year earlier, with both figures came in lower than expected. Third, the potential US tariffs on imports of EU cars remain on the table, which is also a downside risk for the common currency.
As such, the pair may well get back below 1.10 should the sentiment deteriorate. In the near term, euro could also struggle as Fed’s Rosengren who voted against a rate cut on Wednesday delivers a speech later today. Only a firm break above 1.11 will ease the broader selling pressure on the common currency.