Fed’s Internal Differences and Lagging Data Put Dollar at a Turning Point While Euro Strengthens

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Fed’s Internal Differences and Lagging Data Put Dollar at a Turning Point While Euro Strengthens

Bitget-RWA2025/11/14 12:56

By:Bitget-RWA

- EUR/USD climbed to 1.1590 as weak U.S. labor data and Fed policy splits fueled dollar weakness expectations. - Fed officials diverged on rate cuts: Moran favored 50-basis-point cut, Collins opposed, while Musalem noted inflation near 3%. - ECB's projected rate stability through 2027 contrasts with Fed's 125-basis-point easing by 2026, boosting euro despite global risks. - Market pricing for December Fed cuts dropped to 55% as delayed NFP data and mixed CPI components heighten uncertainty. - Technical ind

The EUR/USD climbed to 1.1590 on Monday, building on previous gains as disappointing U.S. employment figures and mixed signals from the Federal Reserve heightened expectations for a weaker dollar. This upward move came after the ADP jobs report fell short of forecasts and

the NFIB Small Business Optimism Index dropped

, reaching its lowest point this year.

Fed’s Internal Differences and Lagging Data Put Dollar at a Turning Point While Euro Strengthens image 0

With the U.S. dollar index (DXY) slipping 0.15% to 99.47,

investors are increasingly anticipating a Fed rate-cut cycle

as the labor market shows signs of cooling and inflation remains persistently above the 2% target.

The ADP data, which indicated slower private-sector hiring, has amplified worries about the strength of the U.S. economy. At the same time, Federal Reserve policymakers are divided on future actions. Dovish governor Stephen Moran

hinted at a 50-basis-point rate reduction in December

, whereas Alberto Musalem from the St. Louis Fed pointed out that inflation is still near 3% and the job market has "cooled in an orderly fashion."

The disagreement intensified as Boston Fed President Collins openly rejected a December rate cut

, fueling concerns about a possible policy deadlock.

Traders are now taking a cautious approach.

As of November 13, short-term interest rate futures reflected a 55% probability of a December rate cut

, a decrease from the near certainty seen earlier. The situation is further complicated by delays in the release of key economic reports.

Goldman Sachs predicts the September nonfarm payrolls (NFP) data

, which is crucial for the Fed's decisions, will likely be published around November 18 or 19. Until then, market participants must interpret mixed signals from private sector data, with Apollo's Torsten Slok observing that

55% of CPI components are increasing at a rate above 3%

Diverging monetary policies continue to benefit the euro.

The European Central Bank (ECB) is expected to leave rates unchanged

through 2027, in contrast to the Fed, which is forecasted to cut rates by 125 basis points by the end of 2026. This policy gap has supported the euro, even as German investor confidence remains weak according to the ZEW survey and global economic uncertainties persist.

Technical analysis, however, indicates that EUR/USD could encounter short-term resistance

, with the RSI below 50 and a drop below 1.1500 potentially extending losses toward 1.1391.

The dollar's direction will likely depend on the upcoming NFP report and the Fed's subsequent actions. A disappointing jobs number could strengthen expectations for rate cuts, while a robust report might postpone easing. For now, the euro is underpinned by the ECB's firm stance and the Fed's internal disagreements, though volatility is likely as economic data and policy decisions remain unpredictable.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.