The Euro continues to lose ground against the US Dollar, with the EUR/USD pair hitting a three-month low of about 1.1523. This drop primarily results from a strong US Dollar, which has gained strength after the Federal Reserve’s recent rate cut of 25 basis points. The US Dollar Index stands close to its three-month peak at 99.80 and is set to achieve a second straight monthly gain as the chances of another rate cut diminish. The Federal Reserve’s recent decisions highlight a clear difference in approach compared to the European Central Bank (ECB), which has kept interest rates steady.

Federal Reserve Actions and Their Impact

The Federal Reserve has reduced the federal funds rate to a range of 3.75% to 4.00%. Their cautious outlook has lowered expectations for a possible rate cut in December. Meanwhile, the ECB has maintained its rate, as inflation hovers near the target and economic growth remains steady. Comments from Federal Reserve officials indicate a careful strategy. Atlanta Fed President Raphael Bostic mentioned concerns regarding their mandates, supporting the rate cut because of its restrictive nature. On the other hand, Cleveland Fed President Beth M. Hammack preferred keeping rates steady, stressing uncertainty about the December decision. As of November 1st, 2025, the US Dollar is continuing its rise following last week’s rate cut by the Federal Reserve. The EUR/USD has dropped to 1.1523, a three-month low, as the market reacts to the Fed’s unexpectedly strong stance. Recent data shows that the US economy created 210,000 jobs in October, surpassing expectations and strengthening the case for the Fed to halt further rate cuts. The differing policies between the two central banks are significantly influencing currency markets right now. While the Fed suggests it may refrain from cutting rates again in December, the ECB is keeping its rates steady, thanks to a robust Eurozone job market. However, the latest flash estimate for Eurozone inflation in October was 1.9%, just below the target, giving the ECB no reason to become more aggressive.

Trader Strategies for EUR/USD Weakness

We believe traders should prepare for further EUR/USD weakness in the upcoming weeks, potentially aiming for the lows observed earlier this year around the 1.1400 level. The US Dollar Index (DXY) remains strong near 99.80, and with solid economic data backing it, the easiest path appears to be a stronger dollar. This trend looks promising as we enter the final months of the year. For derivative traders, a sound strategy would be to buy put options on the EUR/USD to take advantage of further declines. This approach allows for potential profit from a falling exchange rate while clearly defining maximum risk to the premium paid. Given the current momentum, this is a straightforward way to express a bearish outlook. The Fed’s uncertain direction for December is also increasing implied volatility, making options more reactive. One possible strategy is to use put spreads, such as buying a 1.15 put and selling a 1.13 put, to reduce initial costs. This method benefits from both the downward trend and the increased market uncertainty. We saw a similar situation in 2018, when Fed rate hikes contrasted with the ECB’s supportive stance, leading to sustained strength in the US Dollar. The current environment, characterized by a “hawkish cut,” is creating a similar gap that could put pressure on the Euro. This historical comparison supports the expectation of ongoing declines for the EUR/USD pair. Create your live VT Markets account and start trading now.

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