The EUR/USD pair is ticking lower, trading around 1.1590 during Asian hours on Friday, following three days of gains. The pair’s slight decline comes as the US Dollar (USD) stabilizes after a three-day losing streak. However, the Greenback faces significant headwinds from increasing expectations of a Federal Reserve (Fed) rate cut in December.
The CME FedWatch Tool now indicates an over 87% probability of a 25 basis-point rate cut at the upcoming December meeting, a sharp increase from 39% just a week prior. Markets are also factoring in three additional rate cuts by the end of 2026. These dovish expectations are reinforced by reports suggesting White House National Economic Council Director Kevin Hassett, seen as aligned with President Donald Trump’s preference for lower interest rates, is a leading candidate for the next Fed chair.
On the Euro side, the EUR/USD pair may find underlying support from the recent European Central Bank (ECB) Minutes. These minutes revealed that policymakers favored holding interest rates steady amidst prevailing uncertainty, with some even suggesting that further monetary easing might not be required. The Governing Council considered their policy to be “in a good place,” citing resilient economic growth and inflation converging towards their target. Several policymakers even argued that the rate-cut cycle might already be concluded, given that the economic and inflation outlook largely aligns with the ECB’s September projections and current favorable conditions persist.
