EURUSD falls as the US Dollar (USD) gains amid safe-haven flows.

On Monday, EURUSD traded in the 1.0920s, slightly down on the day, as the US Dollar (USD) attracted safe-haven flows as geopolitical worries arose from maneuvers conducted by the Chinese People’s Liberation Army (PLA) in Taiwan. A representative for the US Department of State stated on Monday that they were “seriously concerned” about the PLA’s activity in the Taiwan Strait.

Traders dump the EURUSd ahead of the expected drop at the ECB’s policy meeting on Thursday.

EURUSD comes under pressure ahead of the ECB Traders may sell the Euro (EUR) ahead of the European Central Bank (ECB) meeting on Thursday, potentially causing EURUSD to fall. Most analysts now expect the bank to announce another 25 basis point (bps) (0.25%) rate drop during the policy meeting, marking the second in a row. This, in turn, is likely to weaken the Euro, since lower interest rates attract less foreign capital inflows.

In September, Eurozone headline inflation fell to 1.8%, falling short of the ECB’s 2.0% objective for the first time in almost three years. This, paired with a slowing in economic activity, has increased the likelihood of another rate cut on Thursday. This move would indicate a big “gear change up” in terms of the pace. and the time of the European Central Bank’s easing cycle.

Trading floors in the United States, meanwhile, are likely to be mostly empty due to staff’ absence for the Columbus Day national holiday on Monday.

Trading floors in the United States, meanwhile, are likely to be mostly empty due to staff’ absence for the Columbus Day national holiday on Monday. Although some equity trading will continue, the US bond market will close.

Investors anticipate a 25 basis point rate cut from the Federal Reserve (Fed) in November, following US Producer Price Index (PPI) inflation data on Friday that indicated top PPI fell to 0.0% on a monthly basis in September, missing estimates of 0.1% and the previous month’s 0.2% reading. Core PPI inflation, which excludes volatile food and energy prices, has slowed to 0.2% from 0.3% in August. Annual readings, however, produced mixed results, as PPI decelerated while core PPI climbed by 2.8%, exceeding the previous month’s 2.6%. Despite uneven annual performance, monthly numbers dragged, as did the preliminary US Michigan Consumer Sentiment Index for October, which fell short of September’s level and analysts’ expectations.

The CME FedWatch Tool shows that markets are now pricing in a 90% possibility of a 25 basis point Fed rate drop, up from 83% prior to the PPI report.