Stop the fall, the dollar bulls have returned, according to our weekly forecast for the EUR/USD pair.

The EUR/USD pair managed to keep up its upward momentum throughout the first part of the week, but it was unable to achieve parity and finished the week at about 0.9750, which resulted in a modest loss for the week as a whole.

At the beginning of the fourth quarter, optimism was at an all-time high, with Wall Street reporting big profits and government bonds extending their gains from the previous week.

The increased appetite for risk is providing support for the EUR/USD currency pair.

Participants on the market were of the opinion that an increase in the risk of a global recession would force central banks to slow the rate of quantitative tightening sooner rather than later.

This type of speculation, together with the desire for high-yielding assets, was fueled by the Reserve Bank of Australia's decision to raise the cash rate by only 25 basis points, which was less than was anticipated.

However, the positive energy didn't stick around for very long. On Wednesday, the European Union recommended more penalties against Russia for its invasion of Ukraine in February, which caused the value of the common currency to begin falling.

The unlawful annexation of the provinces of Donetsk, Luhansk, Kherson, and Zaporizhzhia resulted in the imposition of sanctions, which included a price ceiling on Russian oil as well as restrictions on imports and exports coming from and going to the nation.

The European Union is Facing Difficulties Right Now.

In addition, sluggish EU figures reignited fears of an economic downturn in the Union, which dampened the atmosphere of being risk-positive. The September PMIs released by S&P Global were revised downward, indicating a more severe contraction in the business sector.

During the same time period, wholesale inflation in the EU increased by 43.3% year on year in August, while retail sales in the same month dipped by 0.3%, with sales in Germany declining by 1.3%.

The meeting to discuss monetary policy at the European Central Bank Accounts were another factor that influenced the development of the common currency. According to the memo, a number of the officials voiced support for a more significant rate increase of fifty basis points.

In addition, the median prediction for inflation over the next three years remained at 3%. The policymakers noted that the devaluation of the euro could make inflationary pressures worse, but they also emphasized that acting "decisively" now will eliminate the need to increase more vigorously in the future.

Officials at the United States Federal Reserve are more hawkish than they have ever been before.

The mood on the market continued to deteriorate when speakers from the US Federal Reserve hit the lines, reflecting the hawkish tone that is traditionally associated with the Fed.

According to the President of the Minneapolis Federal Reserve Bank, Neel Kashkari, there is still more work to be done about inflation, and while there is a danger of overshooting, there is practically no indication that inflation has peaked.

Both the President of the Federal Reserve Bank of Chicago, Charles L. Evans, and the President of the Federal Reserve Bank of Cleveland, Loretta Mester, have declared that their primary concern is inflation.

In conclusion, Governor Christopher Waller of the Federal Reserve remarked that he does not see any reason to slow down the Fed's policy of tightening monetary policy. In the meantime, information coming out of the United States has added gasoline to the fire of speculation that the Federal Reserve will maintain its aggressive course of monetary tightening.

The report from Nonfarm Payrolls for the month of September showed that the country added 265K new posts in September, which was more than was predicted but fewer than the previous month's total.

The unexpected drop in unemployment to 3.5% was partially offset by a smaller-than-expected drop in labor force participation to 62.3%, down from 62.4% in August. The news came in the wake of a series of disheartening job data for the United States.

On Tuesday, players in the market were informed that the number of employment possibilities had significantly decreased in the month of August, while the number of layoffs and discharges continued to exceed 1.5 million.

In addition, the Challenger Job Cuts report that was released on Thursday stated that companies based in the United States reported 29,989 layoffs in September, which is an increase of 46.4% from August and 67.7% from September of the previous year.

In conclusion, first claims for unemployment assistance for the week that ended on September 30 rose to 219 thousand, which was significantly higher than the projection of 200 thousand. In spite of contradictory evidence, it would appear that the labor market is sturdy enough to survive rate rises. Everything boils down to the rate of inflation.

The following week will have fewer activities, but each one will be more interesting than the last. On Thursday, the United States government will release the Consumer Price Index for the month of September, while on Wednesday, the Federal Reserve in the United States will publish the minutes from its most recent meeting.

It is anticipated that annual inflation would climb by 8.1% this year, which is a little increase from the 8.3% seen last year. The reading for the core should be 6.5%, as expected. Even if the Consumer Price Index (CPI) dropped in August, it is unlikely that this will have much of an impact on what the market believes the Fed will do.

The September Harmonized Consumer Price Index will be published in Germany, and it is anticipated that the current reading of 10.9% will not change. On Friday, everyone will be looking at the Retail Sales numbers for the month of September in the United States.