EUR/USD Slides Toward 1.1650 as Hot US CPI Fuels Fed Hike Bets
EUR/USD extended its decline on Wednesday, sliding toward 1.1650 after hotter-than-expected US inflation boosted Fed rate hike bets. The US Bureau of Labor Statistics reported CPI rose 0.4% month-over-month in January (vs 0.3% forecast) and headline inflation was 3.1% year-over-year. Core inflation held at 3.9%, staying above the Fed’s 2% target.
Following the data, the US Dollar Index (DXY) jumped to a three-month high above 105.00. EUR/USD reversed from around 1.1700 and tested support near 1.1650, a level not seen since mid-November. Traders repriced expectations for a Fed move at the next March meeting, with futures pricing roughly a 40% chance of a quarter-point increase.
The euro’s weakness is also linked to policy divergence. The ECB has signaled possible rate cuts as early as June to support a weak eurozone economy, while the Fed remains hawkish, widening the interest-rate differential in favor of the dollar. Markets are now watching the ECB meeting minutes for clues on the timing and pace of easing. A dovish signal could push EUR/USD below 1.1600.
For traders, 1.1650 is the near-term support. A sustained break could open risk toward 1.1500, while a rebound above 1.1700 would suggest the dollar rally may be losing momentum. Next catalysts include upcoming US retail sales and Fed speakers.
Keywords: EUR/USD, US CPI, Fed rate hike bets, ECB easing, DXY, support 1.1650.
Bearish
Hot US CPI pushing Fed hike bets typically strengthens the USD (higher DXY) and tightens financial conditions. When liquidity conditions worsen and the rate differential favors the dollar, crypto—often treated as a high-beta risk asset—can face downward pressure, especially in the short term.
In this case, EUR/USD moving toward 1.1650 signals persistent USD strength driven by sticky inflation (core 3.9% vs 2% target) and a hawkish Fed vs a potentially dovish ECB. Historically, CPI surprises that lead to hawkish repricing (and higher real yields) have tended to weigh on broad risk sentiment, often causing crypto to underperform during the immediate repricing window.
Short term: elevated volatility around policy cues and FX flows can pressure risk assets.
Long term: if inflation cools and the Fed later pivots, the pressure may ease; but based on this article’s direction (rates staying higher for longer), the near-term bias remains bearish.