Insights 
VT 
Federal Reserve’s Role
Fed minutes indicate rate cuts may continue this year amid employment and inflation concerns. Officials debate a neutral federal funds rate, with nine policymakers favouring two cuts, and Stephen Miren suggesting more.
Money markets project a 94% chance of rate cuts by 25bps in the next meeting. EUR/USD remains above 1.1600, but the RSI indicates bearish momentum. If it drops below 1.1600, support levels are at 1.1574 and 1.1391; resistance is at 1.1700, 1.1760, and 1.1830.
The Euro, used by 19 EU countries, is second to the US Dollar in global transactions. In 2022, it comprised 31% of currency trades, with EUR/USD leading. The ECB manages Eurozone monetary policy, aiming at price stability, either by combating inflation or encouraging growth.
Eurozone economic data, such as inflation, GDP, and trade balance, affects the currency’s strength. Positive data typically attracts investment, strengthening the Euro, while weak data can lead to declines. A positive trade balance boosts currency value due to demand for exports, whereas a negative balance can weaken it.
Market Dynamics
Given the ongoing pressure on the EUR/USD, we see the Euro’s weakness as the dominant theme for now. The political instability in France, a lingering issue from the fallout of last year’s elections, continues to create uncertainty that weighs on the single currency. This political risk, combined with clear economic slowing in Germany, presents a strong headwind.
The German industrial production figure, showing a steep 4.3% month-over-month decline, is particularly alarming for the coming weeks. A contraction of this size is rare and has historically, such as during the 2020 downturn, preceded a broader recession. We will be closely watching the upcoming German trade balance data and the ECB minutes for any sign that policymakers are acknowledging this severe slowdown.
On the other side of the pair, the market has almost fully priced in a 25-basis-point rate cut by the Federal Reserve for its October 29 meeting. This expectation is solidified by recent September 2025 data, which showed Non-Farm Payrolls at a modest 150,000 and Core CPI cooling to 2.8% year-over-year. Normally a rate cut would weaken the dollar, but the Euro’s own problems are currently more significant.
For traders, this suggests positioning for a potential break below the 1.1600 level in EUR/USD. Buying put options with strike prices like 1.1550 or 1.1500 for late October or November expiry could be a viable strategy to profit from further downside. With so many central bankers scheduled to speak, we also anticipate a rise in volatility, which could make options strategies more attractive than outright short positions.
The primary risk to this bearish view is a surprisingly dovish shift from the Federal Reserve speakers this week. If Chair Powell signals that more aggressive or faster rate cuts are coming, it could overwhelm the Euro’s weakness and cause a sharp reversal upward. Therefore, any short-biased strategy should be protected with defined risk or tight stop-losses above the 1.1700 resistance level.
