FX.co ★ Euro Falls as Hawkish Fed Signals Boost Dollar

The euro slipped below $1.12 after hawkish comments from Federal Reserve Governor Christopher Waller and stronger-than-expected US inflation data lifted the dollar. This reversed some of the common currency’s recent gains, which had been supported by easing concerns over AI and the Middle East, as well as declining oil prices. The dollar strengthened on Tuesday after Waller indicated that further rate hikes remain possible, while October’s upside surprise in US inflation reinforced expectations of additional Fed tightening in December. At the same time, the euro is under pressure from France’s political and fiscal strains and from uncertainty over a potential early departure of ECB President Christine Lagarde. The succession debate is intensifying, with Klaas Knot and Pablo Hernández de Cos emerging as leading contenders. On the policy front, ECB Chief Economist Philip Lane suggested that another rate increase in December may be warranted, adding to a growing chorus of policymakers advocating for a third hike this year.