The euro (EUR/USD) advanced on Tuesday, approaching $1.1557, its highest value since November 18, as global investors shifted away from the U.S. dollar following weaker-than-expected economic readings from the United States.
The dollar remained narrowly mixed against major G10 currencies amid delays in key economic releases and renewed anxiety surrounding potential political interference in U.S. financial agencies, including the Federal Reserve and the Bureau of Labor Statistics. These concerns contributed to declining confidence in the greenback.
Analysts at UBS noted that while they expect the dollar to weaken further in 2026 as U.S. real yields cool, any upward movement in the EUR/USD pair will likely stall around 1.20, with possible fluctuations on both sides. The firm’s baseline projection anticipates that interest rates and bond yields will continue to steer currency direction through 2026.
UBS also forecasts that the Federal Reserve will reduce its benchmark rate toward 3.00% in response to an anticipated economic slowdown and a softer labour market.
Market sentiment surrounding a potential December rate cut shifted sharply, with the probability now returning to around 80%, fuelled by increasingly dovish statements from several Fed officials.
New York Fed President John Williams signalled that the central bank may soon adjust its policy stance, providing one of the clearest indications yet of a possible near-term easing.
Despite the shift in expectations, the dollar’s reaction remained subdued, although analysts say the currency appears vulnerable to downward pressure.
Fresh U.S. economic reports reinforced this outlook: retail sales for September rose below forecasts, while ADP’s latest employment data pointed to growing job losses in the four weeks ending November 8.
Producer price inflation increased 0.3% month-on-month, aligning with market expectations.
These soft indicators, combined with dovish commentary from Federal Reserve members, strengthened consensus that the U.S. central bank is on track for its third rate cut of 2025 in December.
In contrast, the European Central Bank (ECB) is widely expected to maintain its benchmark rate throughout 2026, citing steady economic performance and inflation levels near the bank’s target.
Although ECB policymakers agree that the eurozone is “in a good place,” concerns persist over food and services inflation. Bundesbank President Joachim Nagel reiterated that vigilance remains essential.
The ECB left rates steady at 2.00% for the third consecutive meeting. With growth and inflation stabilising after earlier 200-basis-point rate cuts in the year, officials see little need for additional adjustments.
ECB President Christine Lagarde acknowledged a modest improvement in global stability, supported by the U.S.–China truce and selective rollback of U.S. tariffs, but warned that global uncertainty continues to cast a shadow over economic outlooks.
 advanced on Tuesday, approaching $1.1557, its highest value since November 18, as global investors shifted away from the U.S. dollar following weaker-than-expected economic readings from the United States.){kind=link}