The EUR/USD exchange rate remains stable as US markets close for Thanksgiving. There are expectations for a possible rate cut by the Federal Reserve, putting pressure on the US dollar. Currently, the Euro is trading at 1.1596 and is likely to finish the week higher. The CME FedWatch Tool shows an 85% chance of a 25-basis point rate cut. Despite lower-than-expected jobless claims, US inflation reports, weak retail sales, and declining consumer confidence are pressuring the Fed. In contrast, the Eurozone has seen a slight increase in consumer confidence, and the European Central Bank (ECB) has no plans to cut rates at this time.

Eurozone Consumer Confidence

The Eurozone’s Consumer Confidence remains unchanged, registering at -14.2, an eight-month high for November. Data indicates growing confidence in the services, retail trade, and construction sectors, although there are some weaknesses in industry. The EUR/USD pair is showing slight upward momentum, staying just below 1.1600. If it breaks out, it could reach new highs; however, a dip might revisit earlier lows. The DXY index is flat at 99.57, amidst softer comments from the Fed and steady US data. The inflation data from the Eurozone, managed by the ECB, is crucial for the Euro’s value, and the economic strength will impact interest rate decisions. Factors like economic indicators and trade balances are important for the Euro’s performance, particularly from the major economies in the Eurozone. As the US approaches Thanksgiving, we observe a familiar trend from past years when markets were influenced by low liquidity and dovish central bank comments. With the EUR/USD near 1.0950, the focus remains on market expectations regarding future interest rate changes from the Federal Reserve. This quieter time offers an opportunity to prepare for what’s ahead.

Federal Reserve and ECB Policies

The Fed’s policies are creating tension. Recent US inflation for October 2025 was reported at 2.8%, still above their target. However, a cooling job market, as indicated by the latest JOLTS report showing job openings down to 8.5 million, has traders anticipating future cuts. The CME FedWatch Tool now estimates a nearly 60% chance of a rate cut by the end of the first quarter of 2026. Meanwhile, the ECB is in a holding pattern. The latest Harmonized Index of Consumer Prices for the Eurozone is at 2.5%. This is a notable decrease from previous highs, but officials remain cautious and are not signaling immediate cuts. We must closely monitor this subtle policy divergence in the weeks ahead. For derivative traders, this uncertainty suggests that options strategies could be particularly effective. Buying straddles or strangles on EUR/USD before the next major US inflation or jobs report could profit from significant price changes in either direction. Implied volatility is moderate, making these positions relatively inexpensive to enter now. Looking at the charts, EUR/USD is struggling with resistance at the psychological 1.1000 level. Significant support appears around 1.0880, which has held strong in previous tests this month. A decisive break from this range will likely depend on the next major data release. The latest Non-Farm Payrolls report shows the US economy added 160,000 jobs, reinforcing the narrative of a slowly slowing economy. This supports the idea of future easing by the Fed, but does not prompt immediate action. Therefore, we can expect continued sideways trading, influenced by data, as we move into December. Create your live VT Markets account and start trading now.

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