EUR/USD is in a consolidation phase on Wednesday, hovering around 1.1645, remaining unchanged as a risk-off sentiment driven by geopolitical uncertainties keeps traders cautious. The Eurozone presented a limited economic schedule, while the US had a more active one, indicating that factory input prices had increased, impacting traders’ expectations for a Fed rate cut in January.
The EUR/USD pair is experiencing a sideways movement due to ongoing tensions in the Middle East and a scarcity of new catalysts from the Eurozone. Robust US PPI and impressive Retail Sales impact January’s Fed easing outlook. Market participants are closely monitoring Eurozone inflation, US Jobless Claims, and regional Fed surveys.
> The Euro is stabilizing as stronger US data does not elevate the Greenback: Ongoing tensions in the Middle East have maintained most G10 currencies within established ranges, with the exception of the Japanese Yen, which received support from verbal intervention by Japanese authorities. Recent market activity indicates a shift, as the two largest US equity indices recorded losses, the Dow Jones remained stable, and the Russell 2000 experienced a 0.7% increase. Data from the US indicated that the Producer Price Index surged in November, reaching the 3% mark in both headline and core figures on a year-over-year basis. Retail Sales data indicates that American consumers continue to demonstrate resilience, propelling the US economy upward. Meanwhile, the most recent update from the Atlanta GDP Now model reveals an increase in the estimate for Q4 2025 to 5.3%, up from the previous 5.1%. Throughout the day, officials from the Federal Reserve were actively engaged in their duties. Regional Bank Presidents Bostic, Kashkari —twice, Paulson, Goolsbee, and Governor Miran have made headlines, but they offered no new insights into their existing policy positions. In Europe, the agenda was clear, yet legislators in the European Union are contemplating a delay in the vote to eliminate tariffs on US industrial goods as a strategic move in response to the Trump administration’s actions regarding the Greenland acquisition. Furthermore, the French budget awaits approval; however, it may be enacted without parliamentary consent, as reported by sources.
Latest FX Rate Trends: The Euro has shown stability, remaining flat for two consecutive days
- The US Dollar Index, which measures the value of the American currency against a basket of six others, is currently down 0.14% at 99.05.
- The US Bureau of Labor Statistics disclosed that November’s PPI increased by 3%, surpassing the anticipated 2.7% and the previous month’s 2.8% figure. Excluding food and energy, the core PPI experienced a 3% increase, surpassing forecasts of 2.7% and the prior reading from October, which was 2.9%.
- In November, US Retail Sales experienced a robust rebound, increasing by 0.6% month-on-month following a contraction of 0.1% in October, surpassing market expectations of 0.4%. Control Group Retail Sales—utilized by the Census Bureau for GDP calculations—rose by 0.4%, aligning with expectations, although it represents a decrease from a downwardly adjusted 0.6% increase in the previous month.
- Atlanta Fed President Raphael Bostic adopted a firm stance, cautioning that inflation continues to exceed acceptable thresholds and asserting that monetary policy should remain tight for the time being. Minneapolis Fed President Neel Kashkari emphasized the importance of the Fed maintaining a balance between both aspects of its mandate, highlighting that the economy has not decelerated to the extent that was expected. He highlighted robust growth, a stabilizing labor market, and a decline in inflationary pressures.
- Fed Governor Stephen Miran reaffirmed his decidedly dovish position, advocating for potential rate cuts of up to 150 basis points this year. In alignment with that perspective, Anna Paulson indicated that inflation might hit the Fed’s 2% target by the end of the year, noting that the existing policy is merely somewhat restrictive.
- Chicago Fed President Austan Goolsbee highlighted the importance of central bank independence in ensuring price stability.
- The money market has reduced the likelihood of a 25-basis point rate cut by the Fed, as indicated by the Interest Rate Probability tool from Prime Market Terminal. Market participants anticipate the Fed funds rate concluding at 3.20%, suggesting a reduction of 55 basis points.