EUR/USD remains muted around 1.1625 as buyers exercise caution while trading ahead of the US Federal Reserve interest rate announcement. The pair maintained its low intensity tone through the early European session and struggled to capitalize on the overnight recovery move from over one-month lows. Investors are sitting on their hands before a US Federal Reserve interest rate decision, with markets expecting another 25 basis-point cut. With the Fed scheduled to run a play that would make it three cuts in a row, interest rates will be cut to 3.50%–3.75%, their lowest level in nearly three years.
Investors will closely watch the press conference from Fed Chair Jerome Powell, including his remarks on rate expectations for next year. And if Powell does sound more hawkish on inflation or the cuts in 2025 may be smaller, the US Dollar could rise—and hence pressure the EUR/USD pair in the short term.
Us Inflation Worries Hold Back Long-term Rate Cut Hopes
Fresh data out of the US boosts the Dollar. The most recent JOLTS report announced a stronger-than-expected 7.67 million job openings, easily beating estimates. That is an indication that the US labor market is still healthy, which suggests it will be increasingly difficult for the Fed to follow up with an extensive range of rate cuts over a longer period. Some analysts now think rate cuts in 2026 may not be quite as steep.
ECB Pauses Cuts—Giving Modest Support to Euro
By contrast, the European Central Bank is more cautious. The ECB is not threatening further cuts at this point, which could provide some mild underpinning for the Euro. Inflation in the Eurozone has moved closer to the European Central Bank’s 2% target, as ECB President Christine Lagarde recently stated. She said the next direction for interest rates would instead be determined by incoming economic data, not a preset schedule. This wait-and-see approach may also help stall the Euro’s decline against the US Dollar in the short run.
