By Antonio Di Giacomo, Senior Market Analyst at XS.com
The EUR/USD pair began the week trading around 1.1650, reflecting investor caution amid key macroeconomic expectations. The US dollar remains under slight selling pressure, driven by recently weaker Treasury yields and a moderate risk appetite that favors European currencies. In this context, traders remain focused on the release of several important US economic indicators and the upcoming Federal Reserve monetary policy decision.
One of the market’s main focal points is Wednesday’s Fed meeting, where not only the interest rate decision will be announced, but also a new Summary of Economic Projections. These projections will serve as a guide to evaluate the policy outlook for 2025–2026, particularly in an environment of more controlled inflation and signs of economic cooling. Investors are seeking clarity on how many additional rate cuts might be considered in the near term.
Political dynamics are also adding pressure and uncertainty. President Donald Trump has reiterated that he will announce his candidate for Fed Chair in early 2026, potentially signaling a significant shift in monetary policy. His disagreement with Jerome Powell’s cautious stance has fueled speculation about a potentially more aggressive bias toward future rate cuts or even a complete review of the inflation- targeting framework.
In Europe, the macroeconomic landscape is mixed. Germany’s industrial production surprised with a 0.8% rebound in October, suggesting that the eurozone’s largest economy may be gaining traction after months of weakness. Meanwhile, the Sentix investor confidence index improved to -6.2, indicating a gradual recovery in sentiment, although it remains in negative territory. These data points support the euro, even as the broader recovery remains fragile.
The growth differential between the US and the eurozone remains a key driver of EUR/USD behavior. Despite the dollar’s recent softness, the US economy remains relatively solid, though it is beginning to show signs of fatigue in labor- and consumption-related sectors. This week will be crucial to determine whether the slowdown is gaining momentum or if the data provide more encouraging signals.
US labor market reports, including ADP, JOLTS, and weekly jobless claims, could reshape market expectations regarding interest rates. Weak figures would reinforce the narrative that the Fed might adopt a more accommodative tone, which would pressure the dollar and support further EUR/USD gains. Conversely, a still-resilient labor market could limit the pair’s upward potential.
In the meantime, volatility remains subdued, and the pair has found support at key technical levels, suggesting that traders are waiting for a clear catalyst before taking more decisive positions. With the Fed’s announcement just ahead, caution continues to dominate short-term strategies.
In conclusion, EUR/USD is navigating a decisive week marked by crucial economic data and shifting monetary policy expectations in both the US and Europe. The current stability reflects a strategic pause as markets await stronger signals before defining the pair’s trajectory. The outcome of the Fed meeting and the evolution of US labor data will be pivotal in determining the next significant move in the exchange rate.