EUR/USD Declines as Fed Officials Signal Cautious Stance on Rate Cuts

EUR/USD weakens toward 1.1745 in early Asian trading Wednesday, drawing attention from forex participants monitoring the New York session and those trading during Philippines time. The pair’s downward movement follows the release of Federal Reserve meeting minutes that revealed a mixed outlook on monetary policy ahead.

Fed’s December Meeting Signals Divided Opinion on Rate Path

During its December 9-10 meeting, the Federal Reserve implemented a 25 basis point rate reduction, adjusting the federal funds rate target to 3.50%–3.75%. The decision reflected concerns about employment risks and moderating inflation. However, the voting wasn’t unanimous—Governor Stephen Miran preferred a larger cut, while Chicago Fed President Austan Goolsbee and Kansas City’s Jeff Schmid supported keeping rates unchanged.

The minutes reveal that while most Fed officials believe additional rate cuts remain justified if inflation continues to moderate, there’s no consensus on the timing and magnitude of future moves. This ambiguity has already influenced market expectations: the probability of a January rate cut dropped to approximately 15% based on CME FedWatch data following the release.

Market Lacks Clear Direction Amid Policy Uncertainty

“The absence of defined Fed policy direction is filtering through dollar movements and currency valuations across the forex market, including impacts visible to New York session traders and those operating in Philippines time zones,” explained Joseph Trevisani, senior analyst at FX Street. This uncertainty extends to broader financial markets, with Treasury yields also reflecting the lack of concrete guidance.

ECB’s Steady Hand Provides Some Support for EUR

On the euro’s side, the European Central Bank’s recent decision to hold rates steady offers modest support. The ECB maintained its interest rate levels earlier this month and indicated they will likely remain at current levels for the foreseeable future. ECB President Christine Lagarde emphasized that forward guidance on rate decisions remains impractical due to heightened uncertainty, preferring instead a data-dependent approach evaluated at each meeting.

Market pricing currently suggests only a 25 basis point ECB cut by February 2026, with probabilities remaining below 10%. This cautious stance helps limit downside pressure on the euro, even as the dollar finds temporary strength.

What’s Next for EUR/USD Traders

As trading volumes thin ahead of year-end holidays, the US Initial Jobless Claims report scheduled for later Wednesday could provide fresh direction. The combination of Fed policy uncertainty and ECB steady-state messaging continues to define trading dynamics for those monitoring New York session hours and Philippines time activity in the forex space. EUR/USD remains vulnerable to data surprises and any clarification on future monetary policy direction.