By Antonio Di Giacomo, Senior Market Analyst at XS.com
The EUR/USD began the week with solid momentum, climbing toward the 1.1650 area, its highest level in two weeks. The advance is mainly driven by persistent weakness in the U.S. dollar, as global markets aggressively adjust their expectations for Federal Reserve monetary policy. Although the Eurozone’s final composite PMI for November was revised slightly lower to 49.6, remaining in contraction territory,this figure did little to curb demand for the euro.
Market attention remains firmly on the United States, where investors are pricing in with high probability a 25-basis-point rate cut by the Fed at next week’s meeting.
Moreover, several traders are already projecting a broader cycle of cuts for 2026, anticipating a more accommodative stance amid slowing economic activity. This shift in expectations is pressuring U.S. Treasury yields, weakening the dollar, and supporting the bullish movement of EUR/USD.
Another factor shaping the outlook is increasing speculation about the possible nomination of Kevin Hassett as the future Federal Reserve Chair. His more dovish profile and inclination toward lower interest rates have reinforced forecasts of a more flexible medium-term monetary policy. This is helping reduce dollar risk premiums
and boosting the euro’s relative appeal.
Throughout today’s session, traders will closely watch the U.S. ISM manufacturing PMI, expected near 48.6, is still signaling industrial contraction. A weaker-than-expected reading could further increase bets on an immediate rate cut in December, adding additional downward pressure on the dollar. Conversely, a stronger result could introduce short-term volatility in the pair.
This week’s economic calendar also includes key European indicators. On Tuesday, the Eurozone Harmonized CPI will be released, an essential figure for assessing the consistency of the disinflation process. On Wednesday, services PMIs are due, and on Friday, markets await an updated reading of the U.S. PCE index, the Fed’s
preferred inflation gauge.
From a technical standpoint, EUR/USD maintains a constructive structure, with price action holding above key support zones and staying above major moving averages—reinforcing the bullish bias. As long as the U.S. rate-cut narrative remains intact and the Eurozone continues to show relative stability, the pair could extend
gains toward higher resistance levels in the short term.
Finally, market sentiment continues to favor the euro, supported by an increasingly favorable differential in monetary policy expectations. In a scenario where the Fed moves closer to the start of an easing cycle while the ECB maintains a more conservative stance, flows may continue to benefit EUR/USD in the coming sessions.
In conclusion, EUR/USD maintains a clear bullish bias driven by dollar weakness, rising expectations of a U.S. rate cut, and a busy economic calendar that could reinforce this trend. As long as the U.S. slowdown narrative continues to strengthen and the Eurozone avoids major negative surprises, the pair has room to continue appreciating in the short term.