Euro Resists Pressure, Awaits Major Signal from the Fed
The EUR/USD currency pair held steady after four days of slight declines. In Asian trading on Tuesday, the euro traded around 1.1770. This relatively calm movement occurred because the US dollar was limited, as market caution prevailed ahead of the release of the Federal Open Market Committee (FOMC) December Meeting Minutes, which are considered crucial for understanding the Fed's future policy direction.
The euro has the potential to strengthen if the US dollar is further pressured by expectations of a Federal Reserve interest rate cut in 2026. According to CME FedWatch, the probability of interest rates being held on hold at the January meeting is 83.9%, while the likelihood of a 25 basis point rate cut is diminishing. The Fed itself cut interest rates by 25 basis points in December, extending its total rate cuts to 75 basis points through 2025 amid a slowing labor market and persistent inflation.
However, the euro's movement is not entirely free of risks. Geopolitical tensions have escalated again after Russia signaled a change in its negotiating stance regarding Ukraine, following the alleged attack on President Vladimir Putin's residence. This situation has encouraged investor caution and could limit appetite for riskier assets, including the euro.
On the other hand, the euro's weakening is expected to remain limited due to the divergent policy directions between the European Central Bank (ECB) and the Fed. The ECB maintained interest rates in December and signaled they would remain stable for the time being. ECB President Christine Lagarde emphasized that high uncertainty makes it difficult for the central bank to provide clear guidance, which ultimately helps the euro remain resilient amid global pressure. (az)
Source: Newsmaker.id
