The Euro (EUR) strengthened to near 1.1245 against the US Dollar (USD) during early Asian trading on Thursday, as the Democrats secured control of the US Congress in the midterm elections. The USD weakened following the Democrats' victory in both the Senate and House of Representatives, marking a significant shift in power. Analysts suggest this outcome could lead to further USD sell-offs, as a Democratic majority may limit government spending during President Donald Trump's term.
Meanwhile, inflation in the Eurozone surged to 4.0% in October, its highest level in three years, according to a flash estimate released on Wednesday. This figure aligns with market expectations and follows a 3.8% rise in September. The European Central Bank (ECB) maintained its key interest rate at 2.5% last month but is now facing increased pressure to raise rates, with markets pricing in a 72.0% chance of a hike at its December meeting.
ECB officials have adopted a hawkish tone, with Governor Nagel describing a December rate hike as "very likely" due to intensifying inflation risks. Analysts at Scotiabank noted that while Eurozone data remains mixed, inflation and policy expectations are tilting risks toward a firmer Euro. Technical analysis indicates that EUR/USD is capped below the 100-day Simple Moving Average, maintaining a medium-term bearish tone despite recent rebounds.