Dollar Surges as Fed Rate Cut Prospects Dim; EUR/USD Slides to Two-Week Lows

The Greenback Strengthens Amid Fading December Cut Expectations

The EUR/USD currency pair has extended its losing streak to five consecutive trading sessions, sliding to fresh two-week lows near the 1.1500 level and currently trading around 1.1520. This sharp pullback represents a significant reversal from Wednesday’s levels near 1.1600, signaling a decisive shift in market sentiment toward a firmer US Dollar.

The catalyst behind the Greenback’s recent rally stems from hawkish undertones embedded in the latest Federal Open Market Committee (FOMC) Minutes released on Wednesday. The report revealed that numerous Fed officials expressed skepticism about successive rate cuts, citing concerns that premature easing could undermine inflation-fighting efforts and erode public confidence in the central bank’s resolve. This commentary has effectively extinguished market enthusiasm for back-to-back interest rate reductions in the coming months.

The probability of a quarter-point rate cut at December’s 10th meeting has plummeted below the 30% mark according to CME Group’s FedWatch tool, a dramatic decline from the 50% odds recorded just one day prior and sharply lower than the above 90% probability observed a month ago. This rapid reassessment of Fed policy trajectory has provided substantial support to the US Dollar across the broader currency landscape, with the Greenback benefiting from the classic safe-haven flow during policy reassessment periods.

Currency Performance and Cross-Rate Dynamics

Among major currency pairs, the Euro has shown relative weakness, declining 0.10% against the Dollar while posting a notably stronger performance against the Japanese Yen. Within broader currency correlations, the Canadian Dollar (CAD) and Australian Dollar (AUD) have also experienced downward pressure, both declining approximately 0.20% against the Greenback. The New Zealand Dollar (NZD) similarly weakened by roughly 0.25%, reflecting the broad-based Dollar strength environment.

Conversely, the Japanese Yen has demonstrated modest appreciation against the Dollar, rising 0.01%, though this strength appears constrained following comments from Japan’s Finance Minister Satsuki Katayama, who reiterated that recent meetings with Bank of Japan Governor Kazuo Ueda did not include foreign exchange discussions—a market signal interpreted as suggesting Japanese authorities are unlikely to intervene in currency markets at this juncture. This absence of intervention risk has paradoxically buttressed the Dollar’s ascent toward near year-to-date highs against the Yen.

Economic Events and Market Catalysts Ahead

Thursday’s economic calendar presents several data releases that could influence near-term currency direction. In the Eurozone, September Construction Output figures, the German Bundesbank Monthly Report, and November’s preliminary Consumer Confidence reading from the European Commission may provide directional cues for Euro traders. Consumer sentiment expectations suggest a fourth consecutive monthly improvement to -14.0 in November, up from October’s -14.2 level, though this modest improvement may struggle to ignite sustained Euro strength given the broader Dollar momentum.

The primary focus, however, remains fixed on the delayed September US Nonfarm Payrolls report—a critical employment gauge delayed due to the recent 43-day government shutdown. Market consensus anticipates a net job creation figure of 50,000 positions, representing a notable deceleration from August’s 22,000-job gain. Average Hourly Earnings are projected to expand at a 0.3% monthly rate and 3.7% year-over-year, matching August’s pace. The Unemployment Rate is expected to hold steady at 4.3%.

Additionally, the Philadelphia Federal Reserve Manufacturing Survey is forecast to reflect a second consecutive month of deteriorating business conditions in November, though at a moderating pace, with the index expected near -3.1 compared to October’s -12.8 reading. These softer labor market and regional business signals may support arguments for rate cuts, creating potential friction with the Fed’s hawkish positioning evident in recent policy communications.

Technical Perspective: EUR/USD Navigates Bearish Terrain

From a technical standpoint, EUR/USD remains firmly embedded in a short-term bearish trend following rejection attempts near 1.1650 last week. The pair is currently testing critical support in the 1.1500 vicinity, where oversold conditions in the 4-hour Relative Strength Index (RSI) momentum indicator suggest potential near-term consolidation or relief bounce possibilities.

The immediate support foundation rests at the 1.1500 psychological barrier. Should selling pressure persist, the November 5 low near 1.1470 represents the next defensive level, with the bottom of a bearish channel extending from late-September now positioned around 1.1430.

On the recovery side, bulls face a significant hurdle at November 18-19 resistance highs in the 1.1600 area, before encountering the upper bearish channel boundary around 1.1630. A decisive breakout above this resistance zone would potentially clear the path toward October 28-29 highs near 1.1670, though such an outcome would require a material shift in the fundamental backdrop or unexpected economic data surprises.

A substantial recovery appears unlikely unless the macroeconomic environment shifts dramatically or upcoming employment data surprises meaningfully to the upside. For now, the technical setup, combined with diverging monetary policy expectations between the Fed and European Central Bank, continues to favor Dollar strength and EUR/USD weakness into the near-term horizon.