The Euro-to-US Dollar exchange rate stabilised after an eight-day rise, as the US Dollar showed modest strength. The pair is near 1.1659, ending its upward streak, having reached its highest point since 17 October earlier in the day. Sentiment still supports the Euro, as the US Dollar faces pressure before the Federal Reserve meeting, where a rate cut is expected.<\/p>\n
Economists predict a 25 basis point rate cut at the December 9-10 FOMC meeting. The CME FedWatch Tool shows an 87% chance of this cut occurring, as weak US economic data and Fed concerns about the labor market intensify expectations. A recent survey indicated that the Fed Funds Rate might drop to 3.50%-3.75% in December, and potentially lower in early 2026.<\/p>\n
US labour-market data showed Challenger Job Cuts fell to 71.3K in November. Initial Jobless Claims improved to 191K, beating the expectation of 220K. Eurozone Retail Sales were stagnant at 0% in October, but annual sales rose 1.5%, surpassing the forecast. Friday will reveal Eurozone GDP and Employment Change data, while the US will focus on the September PCE Price Index and other economic updates.<\/p>\n
With EUR\/USD pausing after a significant rally, we are seeing the market heavily positioned for a Federal Reserve rate cut next week. This one-sided bet has been the primary driver of US Dollar weakness. The key question for traders is whether this expectation is already fully priced into the market.<\/p>\n
All eyes will be on tomorrow’s US Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge. The previous reading for October 2025 showed core PCE holding at 3.0% annually, a level still above the Fed’s target that has kept officials cautious. If this upcoming report shows inflation is stickier than anticipated, it could force a rapid unwinding of rate-cut bets and trigger a sharp US Dollar rally.<\/p>\n
This situation presents an opportunity for options traders to consider purchasing cheap, out-of-the-money EUR\/USD put options. Such a strategy offers a defined-risk way to position for a potential downside surprise from either the inflation data or a more hesitant-than-expected tone from the Fed. The market\u2019s overwhelming expectation for a cut makes any deviation a high-impact event.<\/p>\n
Historically, we’ve seen scenarios where the dollar strengthens even after a rate cut is delivered, such as during the 2019 cutting cycle, in a classic “buy the rumor, sell the fact” response. With an 87% probability of a 25 basis point cut already factored in, the bar for a dovish surprise that could push the euro even higher is now extremely high. The greater risk lies in the Fed’s statement being less committed to future cuts than the market currently hopes for.<\/p>\n
We are also observing that implied volatility in the forex markets has been climbing, with the Deutsche Bank FX Volatility Index ticking up to a three-month high ahead of these key events. This suggests that options premiums are rising as traders brace for a significant price swing in the coming days. Traders can use strategies like straddles to trade this expected rise in volatility itself, profiting from a large move in either direction.<\/p>\n
While the focus is on the US, we should not ignore Friday’s Eurozone data, including revised GDP figures. The initial estimate for Q3 2025 GDP showed sluggish growth of only 0.1%, highlighting the economic fragility that could limit the Euro’s independent strength. A downward revision to these figures could cap any potential rally in EUR\/USD, even if the US Dollar weakens.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Euro holds gains near 1.1659 as markets anticipate Fed rate cut; US data offers mixed signals.<\/p>\n","protected":false},"author":5,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-36055","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/posts\/36055","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/comments?post=36055"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/posts\/36055\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/media\/16964"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/media?parent=36055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/categories?post=36055"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/tags?post=36055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}