- EUR/USD moves little as traders adopt caution ahead of the FOMC December Meeting Minutes.
- Traders remain uncertain about an end to the Ukraine–Russia war following alleged strikes on Putin’s residence.
- The US Dollar may face challenges due to growing odds of two more Fed rate cuts in 2026.
EUR/USD holds ground after four days of little losses, trading around 1.1770 during the Asian hours on Tuesday. The pair remains steady as US Dollar (USD) moves little amid market caution ahead of the Federal Open Market Committee (FOMC) December Meeting Minutes due later in the day, which could offer insights into the Federal Reserve’s (Fed) 2026 outlook.
The EUR/USD pair may gain ground as the Greenback faces challenges amid ongoing expectations of two more rate cuts by the Federal Reserve (Fed) in 2026. The CME FedWatch tool shows an 83.9% probability of rates being held at the Fed’s January meeting, up from 80.1% a week earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 16.1% from 19.9% a week ago.
The US central bank lowered interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
The Euro (EUR) may face challenges as risk sentiment increases due to the uncertain Ukraine-Russia situation. Russia’s foreign minister said Moscow’s negotiating stance would shift following alleged strikes on President Vladimir Putin’s residence.
However, the downside of the Euro could be restrained as markets reflect diverging policy paths between the European Central Bank (ECB) and the US Federal Reserve. The ECB held rates steady in December and signaled they are likely to remain unchanged for some time, with President Christine Lagarde noting that elevated uncertainty makes forward guidance on future rate moves difficult.
