EUR/USD suffers biggest monthly loss since July 2019

• EUR/USD dropped in September, ending a four-month losing streak. 
• Risk-on weighs over the dollar and lifts EUR/USD on Thursday. 
• The ECB’s plan to adopt average inflation targeting could cap the upside in the euro.

EUR/USD fell by 1.82% in September, confirming its biggest single-month percentage decline since July 2019. 

September’s loss, which snapped a four-month winning trend, happened as the oversold US dollar witnessed a broad-based recovery. Expectations that the European Central Bank would look to put brakes on the euro’s rally also weighed over the common currency. 

At press time, EUR/USD is trading at 1.1742, representing a 0.18% gain on the day. 

The bounce looks to have been fueled by Asian stock market gains and resulting broad-based dollar weakness. 

Reports stating progress in the US fiscal stimulus talks seem to have boosted risk appetite. Stocks facing selling pressure during Wednesday’s US trading hours after President Trump said that the Nov. 3 election result might not be known for months. 

And while EUR/USD is currently better bid, significant gains may remain elusive, as the European Central Bank (ECB) is looking to align its inflation strategy in line with Federal Reserve (Fed). The ECB President said Wednesday that aiming for inflation of 2% on average can strengthen monetary policy’s capacity to stabilize the economy when faced with the lower bound. 

The Fed adopted average inflation targeting in August – a more relaxed approach to controlling inflation. Under the new strategy, the Fed plans to keep rates low for some time after inflation rises above the 2% target. The ECB is now eyeing a similar path. 

Thursday’s data calendar is heavy with the final German and Eurozone Manufacturing PMIs for September, Eurozone jobless rate for August scheduled for release along with the US weekly jobless claims, September personal income data. 

Technical levels