The EUR/USD pair has continued its downward trend for the second day in a row, trading at around 1.1510 during Asian hours on Monday. That said, the euro might find some support as cautious attitudes emerge regarding the European Central Bank’s (ECB) monetary policy direction.
With inflation lingering near the 2% target, steady economic growth, and record-low unemployment, many anticipate that the ECB will maintain interest rates until late 2026. Early data indicated solid growth in the euro zone’s private sector for November, slightly lower than October’s near two-year high but still aligning with expectations, reinforcing the ECB’s careful outlook.
ECB President Lagarde noted on Friday that the bank is staying alert to inflation risks and is prepared to adjust interest rates as needed to keep inflation around the 2% mark. Similarly, ECB Governing Council member and Central Bank of Ireland Governor Gabriel Makhlouf remarked on Thursday that the current monetary stance seems appropriate and is unlikely to change unless significant alterations occur.
Additionally, fresh expectations of a Federal Reserve rate cut in December might affect market sentiment, potentially boosting the EUR/USD as the US dollar weakens. Current market indicators show a 69% probability for a 25 basis point cut in the Fed’s benchmark rate during their December meeting, a notable rise from 44% a week earlier, according to the CME FedWatch tool.
