EUR/USD climbs as Fed rate cut expectations pressure US Dollar
|- Markets maintain a strong conviction that the Fed will cut rates, keeping the US Dollar pressured across major pairs.
- Traders brace for the Fed’s dot plot, which could outline a slower 2026 easing path despite near-term rate cuts.
- ECB officials remain calm about the inflation trajectory, reinforcing expectations that Eurozone policy will stay unchanged longer.
EUR/USD posts modest gains on Wednesday as the last monetary policy meeting by the Federal Reserve (Fed) looms, with investors seeming confident that the central bank will reduce rates. Consequently, the Greenback is pressured as seen by the pair, which trades at 1.1658 up 0.27%.
Euro edges higher with traders confident the Fed will ease policy, while 2026 rate-path uncertainty caps upside momentum
The Fed is expected to cut rates for the third straight meeting, but that is already priced by the markets. Investors are also eyeing the Summary of Economic Projections (SEP), specifically the dot plot, looking for cues regarding the monetary policy path towards 2026.
So far for 2026, money markets have priced in 52 basis points of easing. Nevertheless, speculation for a 'hawkish cut' suggests that hawkish Fed members could agree to reduce rates in exchange for just pricing in one cut for the next year.
Hawks vs. Doves December FOMC 2025
Some of the Fed members leaning hawkish are Jeffrey Schmid, Alberto Musalem, Susan Collins and mildly Michael S. Barr. On the dovish front lie Stephen Miran, Christopher Waller, John C. Williams and Michelle Bowman. This means that in the neutral stance lie the Fed Chair Jerome Powell, Lisa Cook, Austan Goolsbee and Philip Jefferson. As of late, Jefferson struck a slightly dovish message, while Goolsbee seemed worried about inflationary pressures.
Across the pond, in the Eurozone, the docket was empty, yet European Central Bank (ECB) member Makhlouf said that he is confident that inflation in the medium term will be at 2%, according to Bloomberg.
Earlier, ECB President Christine Lagarde said that policy is in a good place and that the bank could upgrade their projections in December.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.05% | 0.75% | 0.04% | -0.06% | -0.22% | -0.16% | |
| EUR | 0.09% | 0.08% | 0.89% | 0.17% | 0.08% | -0.08% | -0.03% | |
| GBP | 0.05% | -0.08% | 0.83% | 0.10% | 0.00% | -0.16% | -0.10% | |
| JPY | -0.75% | -0.89% | -0.83% | -0.70% | -0.79% | -0.91% | -0.88% | |
| CAD | -0.04% | -0.17% | -0.10% | 0.70% | -0.09% | -0.23% | -0.20% | |
| AUD | 0.06% | -0.08% | -0.00% | 0.79% | 0.09% | -0.16% | -0.11% | |
| NZD | 0.22% | 0.08% | 0.16% | 0.91% | 0.23% | 0.16% | 0.06% | |
| CHF | 0.16% | 0.03% | 0.10% | 0.88% | 0.20% | 0.11% | -0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: EUR/USD clings to gains on US Dollar weakness
- The US Dollar Index (DXY) edges lower, down 0.22% to 98.98, as the Greenback weakens broadly against major peers.
- The latest US Job Openings and Labor Turnover Survey (JOLTS) showed that the labor market remains more resilient than expected, with vacancies rising to 7.67 million in October from 7.658 million, according to the Bureau of Labor Statistics (BLS)—a sign of strengthening labor demand.
- The latest ADP 4-week average report showed that private employers added an average of 4,750 jobs per week over the four weeks ending November 22, a notable improvement from the previous period’s 13,500 decline, underscoring a pickup in hiring heading into year-end.
Technical analysis: EUR/USD rangebound below 1.1650, eyes on FOMC meeting
EUR/USD hovers around 1.1650 for a sixth consecutive session, carving out a narrow consolidation band between 1.1650 and 1.1600. Momentum seems to remain bullish, as depicted by the Relative Strength Index (RSI), but buyers need to reclaim 1.1700 so they can challenge 1.1800 and the year-to-date high at 1.1918.
On the flip side, if EUR/USD tumbles below 1.1650, the 50-day Simple Moving Average (SMA) is near 1.1604. A decisive break beneath this zone would expose the 20-day SMA at 1.1599, followed by the 1.1500 psychological level.
(This story was corrected on December 10 at 19:00 GMT to fix in the first bullet point the date of the Fed meeting and to correct the surname of the Fed Governor Christopher Waller)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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