The EUR/USD pair is holding strong around 1.1540 as the US Dollar weakens due to uncertainty in the US labor market. The US Challenger report shows a big jump in layoffs, with 153,074 workers let go in October—a 183% increase from September. This trend is partly linked to the rising use of Artificial Intelligence and companies cutting costs. Expectations for the Federal Reserve to keep interest rates steady in December are easing. The chance of rates staying between 3.50%-3.75% has dropped from 38% to 33%. In Europe, officials from the European Central Bank (ECB) say there is no need for urgent monetary policy changes. ECB Vice President Luis de Guindos has expressed satisfaction with current interest rates, feeling positive about service inflation and growth.

Global Currency Market Responses

The US Dollar Index, which measures the Dollar’s value against six currencies, is slightly up at 99.80 after support was found at 99.60. The global currency market is reacting differently to economic changes, so ongoing monitoring is needed to understand its impact on international trade. Given the renewed risks in the US labor market, we can expect continued weakness of the US Dollar against the Euro. The latest Non-Farm Payrolls report supports this trend, showing only 95,000 jobs added in October 2025, which raised the unemployment rate to 4.2%. This slowdown results from the effects of aggressive rate hikes in 2023. With core inflation now around a more manageable 2.5%, the Federal Reserve can focus on its employment goals. The market is increasingly expecting a rate cut in the December 2025 meeting, marking a significant shift in sentiment recently. This dovish outlook is a key factor putting pressure on the Dollar.

Market Strategies for Traders

Meanwhile, the European Central Bank is signaling stability, with officials comfortable with current interest rates. This difference in policy—where the Fed may ease while the ECB maintains rates—should continue to support EUR/USD strength. We saw a similar situation in late 2023, which led to a steady rise in the Euro. For derivative traders, this environment points to the potential for higher volatility in the currency pair. The Cboe EuroCurrency Volatility Index (EVZ) has risen from about 5 to over 8 in the last month, a trend likely to continue. Buying straddles or strangles could be smart for trading on expected larger price movements without guessing the direction. Given the clear downward pressure on the US Dollar, purchasing call options on the EUR/USD is a defined-risk strategy to benefit from potential gains. We should focus on contracts expiring in the first quarter of 2026 to give time for this policy difference to unfold. This approach allows us to profit from a rising Euro while limiting our maximum loss to the premium paid. Create your live VT Markets account and start trading now.

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