EUR/USD remains steady at around 1.1770 as traders stay cautious ahead of the FOMC December Meeting Minutes. The US Dollar is stable, with the market eager for news on the Federal Reserve’s plans for 2026.

Expectations And Probabilities

Market expectations suggest there could be two more rate cuts by the Federal Reserve in 2026. The CME FedWatch tool indicates an 83.9% chance that the Fed will keep rates steady in January, while there’s a 16.1% chance of a 25-basis-point rate cut. In December, the US Federal Reserve cut interest rates by 25 basis points as part of a total of 75 basis points in cuts for 2025, due to a slowing labor market and ongoing inflation. The Euro may face challenges from the Ukraine-Russia conflict. Russia’s foreign minister has hinted at a change in Moscow’s position after reported attacks on President Putin’s residence. However, the Euro’s decline may be limited by differing policies from the European Central Bank (ECB) and the Federal Reserve. In December, the ECB kept rates unchanged and suggested there won’t be any quick changes, highlighting ongoing uncertainty.

Euro Global Presence

The Euro is the second most traded currency in the world, used by 20 countries in the EU. In 2022, it comprised 31% of foreign exchange transactions, with EUR/USD being the top currency pair. Currently, EUR/USD is stable at 1.1770, but we expect more action today with the release of the FOMC minutes. These minutes could hint at whether the Fed’s recent dovish shift will continue into 2026. For now, the market anticipates more rate cuts, which is putting pressure on the US Dollar. Recent data supports a weaker Dollar. The November 2025 Consumer Price Index (CPI) in the US fell to 3.0%, and job growth was modest with nonfarm payrolls at 150,000, nudging unemployment up to 4.1%. This trend allows the Fed to maintain its easing measures that began earlier in 2025. Conversely, the Eurozone data supports a stronger Euro. November’s HICP inflation rate was steady at 3.5%, prompting the ECB to keep interest rates unchanged for the foreseeable future, leading to a distinct policy difference from the Fed. This disparity is why we anticipate a solid support for EUR/USD in the upcoming weeks. Given the uncertainty before the release of the minutes, we can expect increased short-term volatility. The CBOE Volatility Index (VIX) is around 18, indicating market nerves. This means buying options could be pricier. Using option spreads to manage risk, or selling puts below the 1.1700 level, may be a more cautious way to adopt a bullish stance on EUR/USD. We should also pay attention to the geopolitical tension between Russia and Ukraine, as any escalation could quickly change market sentiment. A shift towards safety would favor the US Dollar and hurt the Euro, regardless of central bank decisions. This risk suggests that we should be careful with long Euro positions until the situation clarifies. Create your live VT Markets account and start trading now.

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