EUR/USD jumps as growing Fed-cut bets and risk-on mood lift Euro
- EUR/USD climbs as improved risk appetite and Fed easing expectations keep the Dollar under pressure.
- Mixed Eurozone inflation readings had limited impact, while geopolitical tensions in Eastern Europe remain a downside risk.
- Markets await Eurozone PMIs and US Services data as traders digest weaker US manufacturing and cooling labor trends.
The EUR/USD registers modest gains of 0.12% late on Tuesday during the North American session, as risk-appetite improves. Expectations for another Fed rate cut in December and Eurozone’s elevated inflation reading, keep the shared currency bid. The EUR/USD trades at 1.1625 after bouncing off daily lows of 1.1591.
Euro edges higher as markets price an 87% chance of a December Fed cut while US data momentum softens
Wall Street finished the session in the green, while the crypto space showed signs of recovery. The Dollar dipped late as US President Donald Trump at a press conference, referred Kevin Hassett as a “potential” Fed Chair.
A scarce economic docket in the US kept traders digesting Monday’s ISM Manufacturing PMI report, which showed that business activity slowed in November, while prices rose and the jobs market cooled down.
Money markets are pricing an 87% probability for a Fed 25 basis points rate cut at the December meeting, a tailwind for the Euro.
Across the pond, inflation data in the Eurozone was mixed, though it had little impact on the EUR/USD.
Downside risks for the Euro is the continuation of hostilities in Eastern Europe. The Russian President Vladimir Putin said that Europe’s demands are unacceptable and added that if they want to fight a war, “we are ready now.”
Ahead this week, the Eurozone docket will feature HCOB Flash PMIs for November, the Producer Price Index (PPI) for the bloc and speeches by European Central Bank (ECB) policymakers. In the US, the schedule will feature S&P and ISM Services PMIs, ahead of Challenger Job Cuts and Initial Jobless Claims on Thursday.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.26% | 0.18% | -0.19% | -0.05% | -0.32% | -0.11% | -0.08% | |
| EUR | 0.26% | 0.44% | 0.09% | 0.21% | -0.06% | 0.15% | 0.18% | |
| GBP | -0.18% | -0.44% | -0.12% | -0.23% | -0.50% | -0.29% | -0.26% | |
| JPY | 0.19% | -0.09% | 0.12% | 0.13% | -0.16% | 0.06% | 0.09% | |
| CAD | 0.05% | -0.21% | 0.23% | -0.13% | -0.32% | -0.05% | -0.03% | |
| AUD | 0.32% | 0.06% | 0.50% | 0.16% | 0.32% | 0.21% | 0.21% | |
| NZD | 0.11% | -0.15% | 0.29% | -0.06% | 0.05% | -0.21% | 0.03% | |
| CHF | 0.08% | -0.18% | 0.26% | -0.09% | 0.03% | -0.21% | -0.03% |
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 market movers: EUR/USD surges as inflation jumps
- Data in the Eurozone, the preliminary reading of the Harmonized Index of Consumer Prices (HICP) rose 2.2% YoY in November from 2.1% in October, defying expectations for unchanged reading. Core HICP held steady at 2.4% YoY, undershooting forecasts of a rise to 2.5%.
- The ISM Manufacturing PMI slipped to 48.2 in November from 48.7 in October, marking the ninth consecutive month of contraction. The employment sub-index deteriorated further, dropping from 46 to 44, while the Prices Paid component rose to 58.5 from 58, slightly below expectations of 59.5.
- US President Trump announced he would name Powell's successor in early 2026, which led to a brief Dollar strength. However, Trump later announced he had narrowed his choice down to one, and then introduced Hassett as the "potential" next Fed Chair, which in turn saw the Dollar move to lows.
Technical analysis: EUR/USD subdued waiting for fresh catalyst
EUR/USD consolidated for the third straight day, despite posting minimal gains but stir resistance at the confluence of the 50- and 100-day Simple Moving Averages (SMAs) at 1.1610/1.1643, caps the pair’s advance towards 1.1700.
Although the pair sits near 1.1650, buyers seem to be losing momentum as depicted by the Relative Strength Index (RSI), which has flattened during the last two trading days, suggesting that they are losing strength.
If EUR/USD drops below 1.1600, the first support would be the 20-day SMA at 1.1576, followed by 1.1500 and the 200-day SMA at 1.1448.
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.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
