EUR/USD Weakens on Fed Rate-Cut Expectations as New York Forex Session Awaits

EUR/USD retreats toward 1.1745 during Asian trading hours on Wednesday, pressured by the latest Federal Reserve meeting minutes. Fed policymakers signal readiness for additional rate cuts if inflation continues to ease. Meanwhile, the European Central Bank’s stance on holding rates steady provides some support to the Euro.

The shared currency has come under selling pressure near the 1.1745 level as Asian traders digest the implications of the Federal Reserve’s December 9-10 meeting outcomes. The Dollar (USD) has strengthened against the Euro (EUR) following the publication of the FOMC minutes, which revealed that most officials view further monetary easing as warranted provided inflationary trends continue to moderate.

During that December session, the Fed opted for a 25 basis point reduction, bringing the federal funds rate target to 3.50%–3.75%. The rationale centered on heightened risks to employment alongside moderating price pressures. Not all members concurred with this approach—Governor Stephen Miran advocated for a larger 50 basis point cut, while Chicago’s Austan Goolsbee and Kansas City’s Jeff Schmid preferred leaving rates unchanged.

The committee remains split regarding the pace and extent of future monetary adjustments. Officials generally expect rates to decline further if inflation persists in its downward trajectory, though consensus on timing remains elusive. Data from the CME FedWatch tool indicates the January rate-cut probability—derived from federal funds futures—has dipped to approximately 15%.

Joseph Trevisani, a senior FX analyst based in New York, remarked that the lack of clear Fed directional signals has created uncertainty across forex markets and Treasury yields alike. This fog around central bank intentions has left traders with limited anchors for positioning, particularly relevant for those trading during the New York session and those monitoring these moves from the Philippines and broader Asia-Pacific region.

The European Central Bank, by contrast, has signaled a more cautious pause. The institution maintained its interest rates unchanged during its recent decision and communicated that borrowing costs would likely remain stable over the near term. ECB President Christine Lagarde emphasized the bank’s inability to provide forward rate guidance, citing persistent uncertainty and underscoring a data-responsive, decision-by-decision framework.

Financial markets have incorporated expectations for a 25 basis point ECB rate cut by February 2026, with such pricing currently below 10%, suggesting limited immediate expectations for easing from the eurozone’s central bank.

Today’s agenda includes the release of US Initial Jobless Claims, though trading participation is anticipated to remain subdued as the year-end holidays approach. The thin trading environment adds to the volatile backdrop for EUR/USD and other forex pairs throughout the New York session and Asian timeframes.