EUR/USD pair is extending its losses for a second consecutive session, trading around 1.1510 during Monday’s Asian hours. However, the Euro’s (EUR) downside may be limited by the cautious sentiment surrounding the European Central Bank’s (ECB) monetary policy outlook.
The ECB is widely anticipated to maintain current interest rates through the end of 2026. This expectation is underpinned by inflation hovering near its 2% target, stable economic growth, and record-low unemployment in the Eurozone. Preliminary data showing robust Eurozone private-sector activity in November—slightly below October’s more than two-year high but generally in line with expectations—further supports the ECB’s prudent approach. ECB President Christine Lagarde reiterated on Friday that the central bank remains vigilant against inflation risks and is prepared to adjust interest rates if necessary to achieve its 2% inflation target. Echoing this, ECB Governing Council member Gabriel Makhlouf stated on Thursday that the current monetary policy is appropriate, with adjustments unlikely unless there is a material change in conditions.
Furthermore, the EUR/USD pair could find upward pressure from a weakening US Dollar (USD). Renewed expectations of a Federal Reserve (Fed) rate cut in December are dampening sentiment towards the Greenback. The CME FedWatch Tool now indicates that markets are pricing in a 69% chance of a 25-basis-point (bps) Fed rate cut at its December meeting, a significant increase from 44% a week ago
