EUR/USD Rises on Growing Expectations of Fed Rate Cuts and Improved Risk Appetite
Date: December 2, 2025
Source: FXStreet – Analysis by Christian Borjon Valencia
The EUR/USD currency pair experienced a modest rally during the North American trading session on Tuesday, buoyed by an enhanced risk-on sentiment and mounting bets on a Federal Reserve interest rate cut. The shared Eurozone currency traded up by approximately 0.12%, reaching 1.1625 after rebounding from intraday lows near 1.1591. ### Key Drivers Behind the Euro’s Strength
Market participants are increasingly pricing in an 87% probability of a 25 basis points reduction in the Federal Reserve’s benchmark interest rate at the December monetary policy meeting. This expectation is rooted in recent US economic data and comments from US political figures, which have collectively applied downward pressure on the US dollar.
Wall Street closed in positive territory on Tuesday, and the cryptocurrency markets also showed signs of recovery, further supporting risk appetite. Meanwhile, uncertainty in the US Federal Reserve’s leadership added to the dollar’s softness. US President Donald Trump, during a press conference, referred to economist Kevin Hassett as a “potential” candidate for the next Fed Chair, a statement that initially boosted the dollar but later contributed to its decline as market confidence wavered.
Mixed Eurozone Inflation Has Limited Immediate Impact
In the Eurozone, November’s preliminary Harmonized Index of Consumer Prices (HICP) indicated an inflation increase of 2.2% year-over-year, slightly above expectations and up from 2.1% in October. However, core inflation remained steady at 2.4%, marginally below forecasts. This mixed inflation data had limited influence on the euro’s movement, as traders focused on broader monetary policy expectations and geopolitical risks.
Lingering Geopolitical Risks
Despite the upbeat mood surrounding the Euro, geopolitical tensions in Eastern Europe continue to pose a potential downside risk. Russian President Vladimir Putin’s recent statements emphasized a readiness to continue hostilities if European demands persist, contributing to baseline caution among currency traders.
Upcoming Economic Events to Watch
Market focus is shifting toward key upcoming data releases for the week, which will provide further direction for EUR/USD. In the Eurozone, HCOB Flash Purchasing Managers’ Indices (PMIs) for November and the Producer Price Index (PPI) are due. Additionally, several speeches from European Central Bank officials are scheduled, possibly revealing clues about the future policy trajectory.
On the US side, investors are closely watching services sector data, including S&P and ISM Services PMIs, followed later in the week by Challenger Job Cuts and Initial Jobless Claims figures.
Technical Analysis Snapshot
Technically, the EUR/USD pair has consolidated around the 1.1600–1.1650 range over the past few sessions. Resistance appears around the confluence of the 50-day and 100-day simple moving averages (SMA) between 1.1610 and 1.1643, which is capping further gains. The Relative Strength Index (RSI) suggests that bullish momentum is slowing, indicating potential near-term consolidation.
Support levels can be found at the 20-day SMA near 1.1576, followed by psychological and technical floors at 1.1500 and the 200-day SMA near 1.1448. ### Euro Performance Against Major Currencies This Week
The Euro has exhibited mixed strength against various major currencies throughout the week. It notably outperformed the British Pound, strengthening by 0.44%, while showing smaller gains against the US dollar (+0.18%) and Japanese yen (+0.09%). Conversely, it faced minor headwinds against some commodity-linked currencies.
About EUR/USD and its Economic Importance
EUR/USD is the world’s most actively traded currency pair, representing roughly 30% of all forex transactions globally. The euro itself is used by 20 European Union countries in the Eurozone and is the second most traded currency after the US dollar.
Monetary policy decisions by the ECB (European Central Bank) and economic data releases such as inflation, GDP, and employment figures heavily influence the euro’s value. Inflation readings that deviate from the ECB’s target can signal upcoming interest rate adjustments, which in turn affect currency valuations.
Summary
The combination of growing expectations for Federal Reserve easing and a more positive global risk environment has provided fundamental support for the Euro. Despite some mixed inflation data from the Eurozone and persisting geopolitical concerns, the EUR/USD pair remains buoyant. Traders will closely monitor forthcoming economic releases from both sides of the Atlantic for fresh directional cues.
Christian Borjon Valencia
FXStreet Analyst
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