The Euro has continued to weaken against the US Dollar, with the EUR/USD pair reaching a three-month low of roughly 1.1523. This decline is largely due to a strong US Dollar, bolstered by the Federal Reserve’s firm stance following a 25-basis-point rate cut.

The US Dollar Index is near a three-month high at 99.80, on track for a second consecutive monthly gain as expectations of another rate cut fade. The Federal Reserve’s recent actions have led to clearer differences in policy compared to the European Central Bank, which has kept rates unchanged.

Federal Reserve Actions and Impact

The Federal Reserve lowered the federal funds rate to between 3.75% and 4.00% and their cautious guidance has reduced assumptions of a potential December rate cut. Meanwhile, the European Central Bank maintains a steady rate, as inflation remains near target and economic growth persists.

Comments from Federal Reserve officials show a cautious approach. Atlanta Fed President Raphael Bostic remarked on tensions in mandates, supporting the rate cut due to restrictive policy. In contrast, Cleveland Fed President Beth M. Hammack preferred steady rates, emphasising uncertainty over the December decision.

As of November 1st, 2025, we are seeing the US Dollar continue its rally following the Federal Reserve’s rate cut this past week. The EUR/USD has fallen to 1.1523, a three-month low, as the market digests the Fed’s unexpectedly hawkish tone. Fresh data released today shows the US economy added 210,000 jobs in October, beating expectations and reinforcing the case for the Fed to pause its rate-cutting cycle.

This policy divergence between central banks is now the primary driver for currency markets. While the Fed signals it may not cut rates again in December, the European Central Bank is holding steady, supported by a resilient Eurozone labor market. However, the latest flash estimate for Eurozone inflation in October came in at 1.9%, slightly below target, which gives the ECB no reason to turn hawkish.

Trader Strategies for EUR USD Weakness

Our view is that traders should position for further EUR/USD weakness in the coming weeks, potentially targeting the lows seen earlier this year around the 1.1400 level. The US Dollar Index (DXY) is holding firm near 99.80, and with strong economic data, the path of least resistance is a stronger dollar. This trend appears solid heading into the final months of the year.

For derivative traders, this suggests buying put options on the EUR/USD to capitalize on further downside. This strategy provides a clear way to profit from a falling exchange rate while strictly defining your maximum risk to the premium paid. Given the clear directional momentum, this is a straightforward way to express a bearish view.

The Fed’s uncertain path for its December meeting is also increasing implied volatility, making options more sensitive. We can consider using put spreads, such as buying a 1.15 put and selling a 1.13 put, to lower the upfront cost of the position. This approach benefits from both the downward trend and the heightened market uncertainty.

We saw a similar dynamic play out in 2018, when Fed rate hikes contrasted with the ECB’s accommodative stance, leading to a sustained period of US Dollar strength. The current environment, with a “hawkish cut,” is creating a comparable divergence that is likely to pressure the Euro. This historical parallel supports the expectation of continued downside for the pair.

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