EUR\/USD has risen above 1.1750, trading around 1.1760 during Friday’s Asian session. Market participants are watching Germany\u2019s Manufacturing PMI data closely.<\/p>\n
The Euro is benefiting from policy differences between the ECB, which has maintained steady rates, and the US Federal Reserve, which is expected to cut rates by 2026. A new Fed chair could influence lower US interest rates.<\/p>\n
The FedWatch tool indicates an 85.1% probability of unchanged rates at the upcoming Fed meeting, with the likelihood of a rate cut dropping to 14.9%. The Fed lowered rates by 25 bps in December, setting the target range at 3.50%\u20133.75%.<\/p>\n
The Euro is the official currency of 20 EU countries. In 2022, it represented 31% of global forex transactions with an average daily turnover exceeding $2.2 trillion. EUR\/USD is the most traded currency pair, making up about 30% of all transactions.<\/p>\n
The European Central Bank influences the Euro through interest rates, aiming primarily at price stability. Inflation exceeding the ECB’s 2% target may prompt rate hikes. Economic indicators like GDP and PMIs, along with trade balance data, play a role in determining the Euro’s value.<\/p>\n
Given the widening policy gap between a steady European Central Bank and a dovish Federal Reserve, we see the path of least resistance for EUR\/USD as upward in the near term. The primary trade is to position for further Euro strength against the US Dollar. Derivative traders should consider buying EUR\/USD call options or implementing bull call spreads to capitalize on this expected move.<\/p>\n
The market’s anticipation of two more Fed rate cuts in 2026 is the key driver of dollar weakness. However, we must note that the December 2025 jobs report showed a stronger-than-expected gain of 216,000 non-farm payrolls, which could complicate the timing of the Fed’s next move. This suggests that while the direction is down for US rates, the path may be volatile.<\/p>\n
On the other side of the pair, the ECB’s hesitation to cut rates is supported by recent inflation figures. Eurozone inflation, as measured by the HICP, unexpectedly accelerated to 2.9% in December 2025, reinforcing the central bank’s cautious stance. This keeps Euro-denominated assets relatively attractive from a yield perspective.<\/p>\n
While the interest rate outlook favors the Euro, we are also monitoring signs of economic weakness in the Eurozone’s largest economy. Germany’s Manufacturing PMI has been in contraction territory, with a recent reading of 43.3 in late 2025. Another weak print could temper enthusiasm for the Euro and cap the rally in the EUR\/USD pair.<\/p>\n
This policy divergence is not new, and we can look to history as a guide for how such trends can play out. The period from 2014 to 2015 saw a similar, though inverse, divergence that led to a sustained trend in the currency pair. This precedent suggests the current environment could support a multi-month upward trajectory for EUR\/USD.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD rises above 1.1750 as markets eye Germany\u2019s PMI and potential Fed policy shifts.<\/p>\n","protected":false},"author":62,"featured_media":16960,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38078","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/38078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=38078"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/38078\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16960"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=38078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=38078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=38078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}