EUR/USD Rallies as Fed Rate-Cut Expectations Pressure the Dollar

The EUR/USD pair advanced sharply during the North American session, climbing around 0.42% to trade near 1.1757–1.1760, after rebounding from intraday lows around 1.1706. The move reflects renewed weakness in the US Dollar as traders increasingly price in monetary easing by the Federal Reserve, despite mixed messaging from policymakers.

With little high-impact economic data released on either side of the Atlantic, market focus has shifted almost entirely to central bank rhetoric and forward-looking rate expectations.

Thin data calendar keeps spotlight on central bank signals

Economic releases in both the US and the Eurozone remained limited, leaving FX markets to react primarily to comments from policymakers.

In the US, remarks from Fed Governor Stephen Miran and Cleveland Fed President Beth Hammack underscored contrasting tones—dovish versus hawkish—but both acknowledged irregularities in recent CPI data, attributed to disruptions caused by the prolonged 43-day US government shutdown. These distortions have raised questions over the reliability of recent inflation readings.

Despite those caveats, futures markets continue to price in the first 25-basis-point Fed rate cut around mid-June 2026, reinforcing downside pressure on the Dollar.

Across Europe, officials from the European Central Bank (ECB) sought to temper market interpretations of their recent remarks. ECB Executive Board member Isabel Schnabel clarified that she had not advocated for imminent rate hikes, although she maintained that inflation risks remain tilted to the upside over the medium term.

US Dollar slides as easing bets dominate sentiment

Dollar weakness remained the dominant driver behind the Euro’s advance. The US Dollar Index (DXY) slipped roughly 0.45% to around 98.27, offering a clear tailwind to the single currency.

While Hammack warned that November’s CPI may have understated true inflation pressures and argued that the neutral policy rate could be higher than markets assume, those comments failed to reverse bearish Dollar momentum. Miran, meanwhile, reiterated that further policy easing remains likely over time, reinforcing investor conviction that US rates have peaked.

November US inflation slowed to 2.7% year-on-year, down from 3.0% previously, though economists continue to caution that shutdown-related data distortions warrant careful interpretation.

What markets are watching next

Looking ahead, traders will turn their attention to Eurozone growth data, including GDP figures from Germany and Spain, which could influence expectations for ECB policy in early 2026.

In the US, the upcoming calendar is busier and includes:

• ADP Employment Change (4-week average)
• Q3 GDP data
• Industrial Production
• Consumer Confidence

These releases may either reinforce or challenge current assumptions around the Fed’s easing path.

EUR/USD remains constructive but capped

From a technical perspective, EUR/USD continues to consolidate within a roughly 50-pip range between 1.1700 and 1.1750. Buyers have so far struggled to sustain a move above 1.1800, a break of which would expose the 2025 high near 1.1918.

Momentum indicators remain supportive. The Relative Strength Index (RSI) points to a bullish bias, suggesting dips may continue to attract buyers.

• Immediate support: 1.1700
• Below that:
  • 20-day SMA at 1.1679
  • 100-day SMA at 1.1656
  • 50-day SMA at 1.1621

A sustained break below 1.1700 would weaken the bullish structure, while a decisive close above 1.1800 would signal renewed upside momentum.