- The European Central Bank lowered borrowing costs by 25 bps on Thursday.
- Experts believe Trump’s tariffs might further weaken the Eurozone economy.
- Recent data has reinforced bets for a December Fed rate cut.
The EUR/USD outlook shows a growing divergence in policy outlooks between the European Central Bank and the Federal Reserve. As a result, the euro fell against the dollar on Friday. Meanwhile, in the US, traders expect a rate cut in December but have slashed bets for cuts in 2025.
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The European Central Bank lowered borrowing costs by 25 bps on Thursday, the fourth such move this year. Moreover, the central bank kept the door open for more rate cuts, noting that inflation had fallen significantly and the economy remained fragile.
At the same time, experts believe Trump’s tariffs might further weaken the economy. Consequently, there might be more cts in 2025. Meanwhile, markets expect the opposite in the US. The upcoming Trump administration will be good for the economy. Therefore, inflation will likely increase, putting a pause on Fed rate cuts. The divergence in policy outlooks will likely keep downward pressure on the euro.
However, recent data has reinforced bets for a December Fed rate cut. Consumer inflation rose more than the previous month but came in line with expectations. Meanwhile, wholesale inflation jumped by 0.4%, above estimates of a 0.2% increase. Although the data did not change the outlook for December, it suggested a more gradual rate-cut pace next year.
EUR/USD key events today
Market participants do not expect any high-impact economic reports from the Eurozone or the US. Therefore, the pair might end the week quietly.
EUR/USD technical outlook: Bears break consolidation
On the technical side, the EUR/USD price has broken below the 1.0475 key support level. As a result, the price has fallen further below the 30-SMA, supporting a bearish bias. Meanwhile, the RSI is approaching the oversold region, indicating solid bearish momentum.
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Before the break, the price was trading in a range with support at 1.0475 and resistance at 1.0601. The price entered this consolidation after a downtrend. Therefore, it might have been a corrective move as bears rested. If this is the case, the downtrend might soon continue. Therefore, the price will likely revisit the 1.0400 support level. A break below this level will make a lower low to continue the previous downtrend.
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