Bold start: The EUR/USD is struggling to break above the 1.1800 area as ECB rate-cut expectations resurface, reshaping the mid-term outlook for the pair.
In plain terms, the EURUSD faces selling pressure for a second day as trading remains quiet in Asia. While this backdrop warrants caution for bears aiming for deeper declines, the door isn’t shut yet.
The US Dollar Index (DXY), which measures the dollar against a basket of peers, holds modest gains and stays above 97.00. That level continues to press on the EUR/USD, helping to keep the pair under pressure. Meanwhile, the euro is weighed down by a growing market view that the European Central Bank could begin cutting rates, a view boosted by euro-area inflation hitting its lowest point since September 2024.
On the upside, USD gains are likely to be capped by expectations for a dovish Federal Reserve. Traders have increasingly priced in a June rate cut after soft U.S. inflation data released last Friday. Yet questions about the Fed’s independence and the central bank’s capacity to pivot aggressively might prevent dollar bulls from running away, which in turn limits the downside for EUR/USD.
Safe-haven demand for the dollar could also wane if risk appetite stabilizes, so many traders are waiting for clearer guidance on the Fed’s rate-cut trajectory before taking new directional bets. The market will likely keep a close eye on the FOMC minutes due Wednesday. In addition, the upcoming U.S. Q4 GDP print, the Personal Consumption Expenditures (PCE) price index, and global flash PMIs should provide fresh catalysts later in the week.
US Dollar Performance This Week
The table below summarizes how the USD fared against major currencies this week, with the dollar showing strength particularly versus the Japanese Yen.
USD EUR GBP JPY CAD AUD NZD CHF
USD 0.23% 0.22% 0.34% 0.21% 0.16% 0.07% 0.15%
EUR -0.23% -0.01% 0.11% -0.02% -0.09% -0.13% -0.07%
GBP -0.22% 0.00% -0.15% -0.01% -0.08% -0.15% -0.06%
JPY -0.34% -0.11% 0.15% -0.11% -0.16% -0.26% -0.12%
CAD -0.21% 0.02% 0.01% 0.11% -0.11% -0.14% -0.05%
AUD -0.16% 0.09% 0.08% 0.16% 0.11% -0.07% 0.02%
NZD -0.07% 0.13% 0.15% 0.26% 0.14% 0.07% 0.09%
CHF -0.15% 0.07% 0.06% 0.12% 0.05% -0.02% -0.09%
The accompanying heat map illustrates how these currencies move against one another, with the base currency in the left column and the quote currency across the top. For example, choosing USD as the base and JPY as the quote shows the corresponding percentage change in the intersecting cell.
If you’re watching this pair: here’s the takeaway. The euro faces headwinds from potential ECB rate cuts, while the dollar’s rise is tempered by Fed-dovish expectations and questions about monetary policy independence. The week’s key events—FOMC minutes, the Q4 GDP report, the PCE index, and global PMIs—could tilt the scales and provide clearer direction for traders.
