EUR/USD dives as Fed hike bets rise ahead of Trump-Xi meeting

EUR/USD: bearish near term, but vulnerable to a sharp reversal. The main pressure is the widening expected policy gap: strong US activity and inflation signals, alongside hawkish Fed remarks, have lifted expectations for further tightening, while the euro-zone’s hawkish outlook appears largely priced in. That favors the dollar through higher relative yields; the reported 70% probability of an October Fed hike makes upcoming US inflation data and Fed communication especially important.

The Trump–Xi meeting is a two-way catalyst. Trade or tariff tensions that add to inflation concerns could reinforce Fed-hike bets and weigh further on EUR/USD. Signs of easing tensions could reduce those concerns and unwind some dollar strength. A less hawkish-than-priced Fed outcome would also leave the pair exposed to a rebound.

The article identifies 1.1350 as a nearby support area. A sustained break could extend the downside, while failure to break—or a recovery that weakens the US-rate advantage—would challenge the bearish case. The key checks are the meeting’s trade implications, subsequent US inflation data, and whether markets continue to price additional Fed hikes.