The EUR/USD pair is experiencing its second consecutive session of losses, trading around 1.1610 during Monday’s Asian hours. This depreciation is largely attributed to the strengthening US Dollar (USD), which is bolstered by recent cautious statements from US Federal Reserve (Fed) officials. These remarks have dampened expectations for an interest rate cut in December.
On Friday, Kansas City Fed President Jeffery Schmid indicated that monetary policy should counteract demand growth and described the current Fed policy as “modestly restrictive” but appropriate. Following these comments, the CME FedWatch Tool now shows financial markets assigning only a 46% chance of a 25 basis point (bps) Fed rate cut in December, a notable decrease from the 67% probability observed just a week prior.
Further supporting the Greenback, market sentiment improved after the US government resumed operations. This followed President Donald Trump’s signing of a funding bill last week, which concluded the record-breaking 43-day government shutdown. Federal employees were instructed to return to work on Thursday.
Meanwhile, Bloomberg reported on Saturday that European Central Bank (ECB) Governing Council Member Olli Rehn highlighted the persistent risk of slowing inflation, despite acknowledging existing upside risks. Rehn also noted the euro-area economy’s resilience in the face of disruptions from the Trump administration’s tariff policies, maintaining slow but steady growth. He underscored the importance of robust bank buffers and a vigilant policy approach.
