- EUR/USD depreciates as the US Dollar gains on cautious Fedspeak.
- CME FedWatch Tool indicates pricing in a 46% chance of a 25-basis-point Fed rate cut in December.
- ECB’s Olli Rehn warned that the risk of slowing inflation should not be overlooked.
EUR/USD extends its losses for the second successive session, trading around 1.1610 during the Asian hours on Monday. The pair appreciates as the US Dollar (USD) receives support from cautious remarks given by US Federal Reserve (Fed) officials, diminishing the likelihood of an interest rate cut in December.
Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should “lean against demand growth,” adding that current Fed policy is “modestly restrictive,” which he believes is appropriate.
The CME FedWatch Tool suggests that financial markets are now pricing in a 46% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from the 67% probability that markets priced a week ago.
The Greenback also gained ground as market sentiment improved after the US government reopened following US President Donald Trump’s signing of a funding bill into law last week, ending the longest shutdown in US history, which lasted 43 days. Federal employees were directed to return to work on Thursday.
Bloomberg reported on Saturday that European Central Bank (ECB) Governing Council Member Olli Rehn cautioned that the risk of slowing inflation should not be overlooked, though upside risks remain. Rehn noted that the euro-area economy is holding up despite disruptions from the Trump administration’s tariff policies, with growth slow but steady. He also emphasized the need for strong bank buffers and a vigilant policy stance.
