The EUR/USD remains steady, trading around 1.1580, after five days of gains. This comes amid expectations that the ECB will hold interest rates steady, supported by a stable economy and inflation nearing targets.

Upcoming German inflation data could influence the ECB’s policy outlook, with the release of October’s CPI and HICP figures being closely watched. Meanwhile, the USD holds its ground as the US government process moves towards reopening, after a bill was passed by the Senate and awaits the President’s signature.

Impact Of Employment Data

Despite this, the Greenback faces pressure following weak ADP employment data, suggesting policy easing. Private employers cut an average of 11,250 jobs per week in the four weeks ending October 25. The market now sees a 68% likelihood of a 25-basis-point rate cut in December.

The Euro, the currency of 20 EU countries, is the second most traded globally, accounting for 31% of foreign exchange transactions. The ECB, based in Frankfurt, manages Eurozone monetary policy, aiming for price stability through interest rate decisions. Eurozone inflation and economic data play significant roles in the Euro’s value, with strong economies and positive trade balances boosting the currency.

We are looking at a very different picture today, on November 12, 2025, than the one presented in the historical analysis from the late 2010s. Back then, EUR/USD was trading near 1.1600 with the Fed expected to cut rates, but today we see the pair struggling around 1.0750. The main driver is no longer potential Fed easing, but a stark policy divergence between a hesitant Fed and a more dovish European Central Bank.

The ECB is signaling a potential pivot toward rate cuts as inflation moderates across the Eurozone. For instance, the latest German HICP data for October 2025 came in at 2.4%, continuing its downward trend from the highs we saw back in 2023. This reinforces market expectations that the ECB, with its main rate at 3.5%, may be forced to act sooner than its US counterpart to stimulate a sluggish economy.

US Monetary Policy

Conversely, the US Federal Reserve remains cautious, holding its key interest rate at 4.75% as inflation proves sticky. The most recent US CPI report showed core inflation still hovering around 3.2%, which is well above the Fed’s target and complicates any discussion of imminent rate cuts. This significant interest rate differential in favor of the dollar makes holding US assets more attractive for yield.

This rate gap is a dominant factor for traders and suggests a strategy favouring the US dollar in the near term. We have seen this play out historically, such as during the 2022-2023 period when the Fed’s aggressive hiking cycle propelled the dollar higher. For derivative traders, this environment could make buying EUR/USD put options attractive, targeting a move toward the 1.0600 level in the coming weeks.

Further economic data supports this outlook and should be watched closely. Recent Eurozone Manufacturing PMI figures have dipped to 48.5, indicating a contraction, while the latest US non-farm payroll report showed a respectable, albeit slowing, addition of 150,000 jobs. This fundamental economic divergence reinforces the currency market’s current direction.

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