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- EUR/USD flat lines near 1.1625 in Wednesday’s early European session.
- Financial markets expect the Fed to make its third straight 25 bps reduction.
- Growing speculation that the ECB is done cutting interest rates could support the Euro.
The EUR/USD pair trades flat around 1.1625 during the early European session on Wednesday. Markets turn cautious ahead of the US Federal Reserve (Fed) interest rate decision later on Wednesday, in which a 25 basis points (bps) rate cut is almost fully priced in.
The Fed is expected to deliver a further interest rate cut at its December meeting, bringing levels to a range between 3.50% and 3.75%. This would be the lowest in around three years. Traders will closely watch Fed Chair Jerome Powell’s press conference, which could offer some hints about how many cuts the dot plot will lay out for next year. Any hawkish remarks from the Fed officials could boost the US Dollar (USD) and act as a headwind for the major pair in the near term.
Investors have been dialing back on expectations of rate cuts in 2026 amid lingering inflation concerns and signals of a more resilient US economy. Data released by the US Labor Department’s JOLTS report on Tuesday showed that job openings rose to 7.67 million in October, beating forecasts of 7.20 million. This upbeat jobs report contributes to the Greenback’s upside.
Across the pond, the European Central Bank (ECB) has adopted a cautious approach to monetary policy, suggesting a pause in the rate-cutting cycle for now. This, in turn, could provide some support to the shared currency against the USD. ECB President Christine Lagarde said in recent statements that the Eurozone economy is in a “good place,” with inflation close to the 2% target. Lagarde emphasized that the ECB is not pre-committing to a particular rate path and will maintain a data-dependent, meeting-by-meeting approach to future decisions.
