The euro quietly strengthens against the dollar as markets enter a calmer start to a week dominated by the Federal Reserve decision. EUR/USD is trading a touch higher around 1.1665, up from Friday’s dip to 1.1630, but still within last week’s range. A measured risk appetite supports the euro, though overall volatility remains subdued ahead of the Fed’s policy meeting.
Expectations point to a 25 basis point rate cut from the Fed on Wednesday, with Chairman Jerome Powell likely to maintain a hawkish tone given inflation remains sticky. The FOMC is anticipated to show a notable split in views across policymakers, which could blur the central bank’s trajectory.
In Europe, remarks from Isabel Schnabel, a member of the European Central Bank’s Executive Board, have reinforced expectations that the next move could involve tightening rather than easing. Strong German industrial data—industrial production rose a surprising 1.8% in October after a 0.4% drop expected by the market—has also buoyed the euro. Later on, Sentix’s Investor Confidence survey for the euro area could provide further directional hints.
On the U.S. calendar, Monday is light. Tuesday’s release of the ADP Employment Report and JOLTS job openings will add context to the Fed’s stance, especially since the November nonfarm payrolls figure arrives next week.
Euro performance versus major peers shows the euro as the strongest among the main currencies against the British pound in particular.
Market moves at a glance: the dollar remains on the defensive as traders price in easing from the Fed, while the euro benefits from broader central-bank easing expectations nearing the end of the current cycle. CME’s FedWatch tool puts the odds of a 25 bp cut on Wednesday at roughly 88%, with only about a quarter of participants pricing in additional cuts for January, implying that Powell may signal upside risks to inflation.
Technical snapshot: EUR/USD is consolidating near 1.1650, with a bullish tilt intact as it rides an uptrend that formed from the November 20 low. Resistance sits around 1.1680, with a potential push toward the late-October highs near 1.1730 and then 1.1778 if momentum strengthens.
Near-term support rests around 1.1640–1.1630, where trendline and Friday’s low converge. If prices drift lower, targets shift toward the early-December lows around 1.1590, and further down to the late November levels around 1.1550–1.1555.
What this could mean going forward: higher rates in the U.S. generally bolster the dollar, but with the Fed expected to ease and with ECB signals leaning toward a later-stage easing cycle, the euro could maintain a bid as long as European data stay resilient and global risk appetite remains steady.
Are you surprised by the potential for a hawkish communication from Powell even as the Fed cuts rates? Do the European indicators justify pushing the euro higher, or could shifts in U.S. data flip the balance? Share your take in the comments.
