The EUR/USD pair holds firm above the 1.1750 level, trading around 1.1770 during Asian hours on Tuesday after four consecutive sessions of marginal declines. Price action remains subdued as the US Dollar trades cautiously, with investors reluctant to take fresh positions ahead of the release of the Federal Open Market Committee (FOMC) Minutes from the December meeting later in the day. The minutes are expected to provide further clarity on the Federal Reserve’s policy outlook for 2026.
The pair continues to find support from persistent expectations that the Fed will deliver two additional interest rate cuts in 2026. According to the CME FedWatch tool, markets are pricing in an 83.9% probability that rates will be left unchanged at the January meeting, up from 80.1% a week earlier. At the same time, the probability of a 25-basis-point rate cut has eased to 16.1% from 19.9%, keeping the US Dollar on the defensive.
At its December meeting, the Fed cut interest rates by 25 basis points, bringing the target range to 3.50%–3.75%. This marked a cumulative 75 bps of easing in 2025, as policymakers responded to signs of a cooling labor market while inflation remained above target.
On the Euro side, the single currency faces headwinds from elevated geopolitical risks tied to the uncertain Ukraine-Russia situation. Russia’s foreign minister said Moscow’s negotiating stance could change following alleged strikes on President Vladimir Putin’s residence, weighing on broader risk sentiment.
Nevertheless, downside pressure on the Euro appears limited as markets continue to price in diverging policy trajectories between the European Central Bank and the Federal Reserve. The ECB left interest rates unchanged in December and signaled that they are likely to remain on hold for an extended period. ECB President Christine Lagarde emphasized that heightened uncertainty makes it difficult to provide clear forward guidance on future policy moves, helping to anchor expectations and support the common currency.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
