The EUR/USD pair is trading below 1.1700, currently around 1.1690, despite recent developments like the Federal Reserve’s rate cut and anticipation of the US Jobless Claims data. The Fed has lowered its key overnight borrowing rate by 0.25%, bringing it to a range of 3.5%-3.75%. Federal Reserve Chair Jerome Powell has indicated that the Fed can now wait and observe economic changes. Currently, the market sees a 78% chance that the Fed will keep interest rates steady next month, based on the CME FedWatch tool. At the same time, the European Central Bank (ECB) is expected to maintain its rates in the next meeting.

Key Economic Figures

It’s important to watch key figures like GDP and inflation, which influence the Euro’s value. When inflation goes over the ECB’s 2% target, rate hikes are likely, which could support the Euro. A strong economy and positive trade balance are also good for the Euro, drawing in foreign investment. The Eurozone’s economy is largely influenced by Germany, France, Italy, and Spain, which together make up 75% of the region’s economy. Thus, data from these countries can significantly impact the Euro’s strength. The current ECB policy appears stable. The Federal Reserve’s recent rate cut to the 3.5%-3.75% range suggests a pause in policy, causing some market uncertainty. As a result, the EUR/USD pair is struggling to break above 1.1700, making this a key point to watch in the coming weeks. The main takeaway is the increasing policy divergence between a Fed that is pausing and an ECB that intends to hold steady. This Fed pause is reasonable since core inflation in the US has remained above 3% for several months. We’ll be keeping an eye on the upcoming US Initial Jobless Claims, with expectations around 215,000, to determine if the labor market is showing signs of cooling. Any significant changes from this estimate could impact the dollar, as the market is pricing in a 78% chance the Fed remains on hold next month.

The ECB and US Economic Outlook

In contrast, the ECB has more flexibility because Eurozone HICP inflation has been closer to their 2% target, recently recorded at 2.3% for November 2025. This allows them to confidently keep rates steady, as emphasized by ECB President Lagarde. This stance from the ECB should help strengthen the Euro against the dollar. For derivative traders, this period of inactivity from the central banks may reduce volatility in the EUR/USD pair. Strategies like selling options, such as short strangles, could be effective in this low-volatility, range-bound market near the 1.1700 mark. The expectation is for the pair to trade sideways until clearer signals emerge from upcoming economic data. Historically, the current rate-cutting period marks a significant shift from the aggressive rate hikes we saw throughout 2023, when rates exceeded 5%. Although the Fed has paused for now, the overall trend remains dovish, which typically puts downward pressure on the US dollar. If US growth and employment data weaken, we might see the dollar decline further, potentially allowing EUR/USD to break through resistance in the new year. Create your live VT Markets account and start trading now.

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