The EUR/USD pair eased as the US Dollar gained strength, trading around 1.1773 after hitting a high of 1.1802 earlier in the day. The US economy showed stronger growth than expected in the third quarter, with GDP rising at an annualized rate of 4.3%. This figure surpasses earlier estimates of 3.8% and market expectations of 3.3%. The GDP Price Index rose by 3.7%, higher than the predicted 2.7% and the previous reading of 2.1%. Core Personal Consumption Expenditures increased by 2.9%, meeting expectations, while Personal Consumption Expenditures Prices went up by 2.8%, higher than the previous 2.1%. These figures indicate ongoing price pressures in the US economy.

Durable Goods Orders Analysis

Durable Goods Orders for October showed weaker performance, dropping by 2.2%, which is worse than the expected 1.5% decline and reversing last month’s growth. Orders excluding transportation saw a minor increase of 0.2%, falling short of the anticipated 0.3%. Additionally, Industrial Production fell by 0.1% month-over-month in October, which was less than the expected 0.1% rise. The US Dollar Index is currently around 98.10, slightly recovering after a recent dip. Traders are now looking forward to the upcoming US Consumer Confidence data, which could impact near-term movements of the EUR/USD pair. With the US economy showing a strong 4.3% growth in the third quarter of 2025, we are considering strategies that favor a stronger dollar. The high inflation figures, with the GDP Price Index at 3.7%, suggest that the Federal Reserve is unlikely to ease policies any time soon. This situation makes bearish positions on EUR/USD appear more attractive as we approach the new year.

Market Implications and Trading Strategies

This perspective is supported by current market assessments from the CME’s FedWatch Tool, which now shows less than a 15% chance of a rate cut in the first quarter of 2026, down from over 40% just a month ago. The market is adjusting to the reality of higher US interest rates staying for longer. This divergence in policies strongly supports the dollar against the euro. For derivative traders, buying put options on the EUR/USD for January or February 2026 could be a smart choice. Strike prices around 1.1700 or 1.1650 might offer good value, allowing traders to profit if the pair drops below its recent support levels. This strategy directly capitalizes on continued dollar strength due to the Fed’s firm stance. However, weaker October data on Durable Goods and Industrial Production creates some uncertainty about the economy’s momentum as we enter the fourth quarter. This potential volatility can be addressed by using straddles ahead of the next FOMC meeting in January 2026, benefiting from significant price moves in either direction. We have seen a similar trend before, recalling the 2022-2023 cycle when persistent inflation forced the Fed to maintain a hawkish approach longer than anticipated. During that time, the dollar index (DXY) rose significantly as the policy gap with other central banks widened. The current late 2025 data is setting up a similar scenario. Additionally, recent data from Eurostat revealed that headline inflation in the Eurozone decreased to 2.5% in November 2025, bringing it closer to the European Central Bank’s target. This puts more pressure on the ECB to consider rate cuts sooner than the Fed. The growing difference between the two economies is a key reason to expect a lower EUR/USD. The upcoming US Consumer Confidence report for December will be a vital near-term catalyst. A strong report would likely enhance dollar momentum and could push EUR/USD decisively below the 1.1750 support level. We should be ready for a rapid move if the data confirms the economy’s strength. Create your live VT Markets account and start trading now.

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