Insights 
VT 
The EUR/USD fell over 0.40% following comments from Federal Reserve Chair Jerome Powell suggesting that a December rate cut is unlikely. Market expectations for a rate cut in December decreased to 62% from 85%, according to LSEG data.
US Dollar Influence
Powell indicated a division within the Federal Open Market Committee and remarked that the policy rate might be near neutral. After his comments, the EUR/USD dipped to a five-day low of 1.1577 before stabilising slightly above 1.1500.
The US Dollar Index increased by 0.63% to 99.28, affecting the EUR/USD rate. Attention is now on the European Central Bank’s monetary policy decision, with expectations that rates will remain unchanged.
The Federal Reserve enacted a 25-basis point rate cut to 3.75%-4%, though the decision was not unanimous. Meanwhile, traders are watching for progress on US-China trade negotiations.
The Eurozone inflation rate, informed by the Harmonized Index of Consumer Prices, is crucial in determining potential interest rate actions from the ECB. The Euro is the second most traded currency globally, with Eurozone economic data influencing its value against the US Dollar.
As of today, October 30, 2025, the market setup is feeling very familiar. We are seeing a situation similar to past events where the Federal Reserve delivered what was called a “hawkish cut,” creating significant dollar strength. With the latest US CPI data for September 2025 coming in at a stubborn 2.8%, the market is once again trying to guess if the Fed will signal a pause or an outright pivot to easing at its December meeting.
Market Strategy and Volatility
The key lesson from that previous period is that the Fed’s commentary can be more powerful than its actions. Back then, a 25-basis-point cut was overshadowed by hawkish forward guidance, causing EUR/USD to fall. Today, with the European Central Bank signaling it will hold its own rates steady amid Eurozone inflation of 3.1%, any hint of patience from the Fed could create a major policy divergence and fuel a similar dollar rally.
For those trading EUR/USD, this suggests that positioning for dollar strength could be prudent in the coming weeks. If the pair breaks below its recent support level of 1.0800, we could see a quick move toward the August lows near 1.0650. Traders might consider buying put options on the EUR/USD to capitalize on a potential drop while limiting their upfront risk.
The uncertainty surrounding the Fed’s language also points toward higher volatility. We saw in 2023 how the bond market’s MOVE index spiked on policy uncertainty, and a similar environment could be building now. This makes strategies like buying option straddles on EUR/USD ahead of the December FOMC meeting attractive, as they profit from a large price move in either direction.
Right now, derivatives markets, according to the CME FedWatch Tool, are pricing in about a 65% chance of a 25-basis-point cut in December, down from 80% just a few weeks ago. This shift shows nervousness is growing, much like it did in the past when odds fell from 85% to 62% right after the Fed’s announcement. Traders can use Fed Funds futures to speculate directly on this outcome, betting that the market is still too optimistic about a cut.
