The EUR/USD exchange rate steadied near the 1.1750 mark during the Asian session on Wednesday. Despite some volatility, market conditions seem to favour bullish traders, indicating potential for upward movement. The positioning comes amid diminishing recovery momentum for the US Dollar. This is influenced by expectations that the Federal Reserve might maintain dovish policies, despite a mixed US jobs report showing 64K new jobs in November, higher than expected but paired with a rise in unemployment to 4.6%.
The mixed job market data does not seem to alter expectations for further interest rate cuts by the US central bank. Additionally, there is speculation about a dovish new head for the Federal Reserve. President Trump is reportedly considering Fed Governor Christopher Waller, among others, as a potential successor to Jerome Powell. In contrast, the Euro gains support from the perception that the European Central Bank will avoid further rate cuts. The final Eurozone CPI figures and the ECB policy meeting on Thursday will be key in influencing future market trends.
Economic Indicators
Traders continue to monitor economic indicators, such as GDP and inflation, that can impact the Euro’s value. High Eurozone inflation often leads the ECB to raise interest rates, enhancing the currency’s appeal. Economic health indicators from major Eurozone countries like Germany and France are pivotal, as they constitute the majority of the region’s economy. A positive net Trade Balance also strengthens a currency by increasing demand for exports.
The Euro is a crucial currency in the foreign exchange market, accounting for a significant portion of global transactions. The European Central Bank, responsible for managing the monetary policy of the Eurozone, holds substantial influence over the currency’s stability and value. Decisions related to interest rates and economic data releases remain instrumental in directing market movements and investor strategies.
With EUR/USD holding near the 1.1750 mark, we see the US dollar’s recent recovery attempt losing steam. This environment appears to favor a continued rise in the currency pair. The path of least resistance seems to be upwards for now.
The dollar’s weakness is being driven by market expectations of a more dovish Federal Reserve. Last week’s US jobs report for November 2025 showed a gain of only 95,000 jobs, and futures markets are now pricing in a high probability of at least one Fed rate cut by March 2026. This sentiment is capping any significant strength in the greenback.
Market Speculation
This situation feels similar to what we observed back in the 2019-2020 period, when uncertainty over the Fed’s long-term policy direction kept sustained dollar rallies in check. The current speculation about the Fed’s next moves is creating a familiar headwind. A dovish stance from the US central bank generally makes the dollar less attractive to hold.
On the other side of the pair, the euro is finding solid support. Recent Eurostat figures from late November 2025 showed core inflation holding at 2.3%, which supports our view that the European Central Bank is done cutting interest rates for the foreseeable future. This policy divergence between a dovish Fed and a steady ECB is the main driver for the euro’s strength.
For traders, this suggests positioning for further EUR/USD upside in the coming weeks. Buying call options could capture this potential upward move, while using bull call spreads could be a way to reduce the initial cost, especially with the key ECB meeting happening tomorrow. Watching the final Eurozone CPI print today will be important for immediate confirmation.
Implied volatility will likely rise around tomorrow’s ECB announcement and the subsequent US inflation data release. This makes option selling strategies, like put credit spreads with a strike below a key support level like 1.1700, a viable approach for those who believe the pair will not fall significantly. The premium collected could benefit from the expected post-announcement drop in volatility.
