EUR/USD has reached a six-week high as the US Dollar weakens due to shifts in the Federal Reserve’s approach. Despite the ISM Services PMI beating forecasts, signs of weak demand and hiring issues have traders looking closely at the upcoming PCE inflation report before the Fed makes its rate decision. The Euro is gaining strength against the US Dollar while traders digest recent data from the US services sector. Currently, EUR/USD is trading around 1.1660, close to its highest level since October 20. The ISM Services PMI rose slightly to 52.6 in November, exceeding expectations of 52.1, indicating stable economic activity.

Signs Of Economic Shift

However, the details paint a mixed picture; New Orders fell to 52.9, yet remained above the average, and the Employment Index stayed negative at 48.9. The Prices Index dropped to 65.4, the lowest level in months. Additionally, the S&P Global US Services PMI also indicated a slowdown, decreasing to 54.1, a five-month low. The ADP Employment Change report revealed a decline of 32,000 jobs in November, signaling weakness in the private sector. This information hints at a potential rate cut by the Federal Reserve, leading to increased focus on Friday’s PCE inflation report. Meanwhile, the US Dollar is struggling against currencies such as the Canadian Dollar. This market trend feels familiar, with weakening US economic data exerting pressure on the dollar and boosting EUR/USD. The pair is testing the 1.1000 level for the first time since August, driven by rising expectations of a more cautious Federal Reserve. This situation mirrors past cycles where softening US fundamentals preceded policy changes by the Fed. Recent U.S. jobs data reinforces this sentiment. The November 2025 Non-Farm Payrolls report showed only 95,000 jobs were added, far below the expected 160,000. As a result, the unemployment rate has increased to 4.2%, the highest in over two years.

Market Strategies Amid Economic Trends

Slowing inflation supports a patient Fed. The latest CPI data shows core inflation at a 2.8% annual rate, the first time it has dipped below 3% since early 2023. This gives policymakers more leeway to consider rate cuts in the first half of 2026. Such data strengthen the narrative of a cooling US economy, diminishing the dollar’s appeal. For derivative traders, this scenario suggests that buying near-term call options on the Euro could be a smart strategy to profit from further gains in EUR/USD. The defined risk of options is especially attractive, given the potential volatility around the upcoming Fed meeting next week. Setting up bull call spreads might also be an effective way to position for a gradual upward move while reducing upfront costs. We’ve noticed a significant rise in market expectations for price swings, reflected in option pricing. The implied volatility for one-month EUR/USD options has surged to an eight-month high of 8.5, signaling that traders are preparing for a notable move. This heightened volatility makes selling cash-secured puts on the Euro potentially more rewarding for those willing to acquire the currency at a lower price. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now