Anna 
EUR/USD found itself in a narrow trading range around 1.0550 during early European trade on Monday, as the currency pair remained on the defensive. Meanwhile, the U.S. Dollar Index (DXY), measuring the greenback against a basket of major currencies, held firm near the upper end of its recent range at 106.70. The Dollar’s relative strength has been mirrored by sporadic increases in U.S. yields.
In terms of monetary policy, market consensus is steadily coalescing around the expectation that the Federal Reserve (Fed) will maintain its current interest rate stance at the forthcoming meeting on November 1. However, the prospect of rate adjustments looms on the horizon for December, a belief bolstered by the enduring resilience of the U.S. economy and persistently elevated inflation levels.
On the other side of the Atlantic, the European Central Bank (ECB) made an unsurprising unanimous decision to leave interest rates unchanged during its October 26 meeting. ECB President Christine Lagarde reaffirmed that there is more work to be done in terms of addressing inflation concerns, while she foresees inflation remaining stubbornly high for an extended duration. In her remarks, Lagarde acknowledged that the risks to the economic outlook tilted toward the downside, infusing a bearish undertone into the meeting.
From the perspective of speculative market participants, the Commodity Futures Trading Commission (CFTC) reported that net long positions in the euro surged to a four-week high in the week ending October 24. This increase coincided with the EUR/USD pair’s consolidation phase, taking place amid the ongoing recovery of the U.S. economy and escalating caution ahead of the European Central Bank’s meeting.
As the world watches these central banks closely, it remains to be seen how their monetary policies will continue to shape the fortunes of the EUR/USD currency pair in the near term.
