EUR/USD softens after eight-day rally ahead of key US PCE and Eurozone data

• EUR/USD steadies off highs as modest Dollar strength and mixed Eurozone data temper bullish momentum.
• Fed rate-cut bets remain dominant, with economists widely expecting a 25 bps reduction at the December 9-10 FOMC.
• Attention turns to US PCE inflation, which may shape expectations ahead of next week’s Fed meeting.

The Euro (EUR) trades slightly lower against the US Dollar (USD) on Mondayweighed down by a modest uptick in the Greenback. At the time of writing, the pair is hovering near 1.1659, snapping an eight-day winning streak after briefly climbing to its highest level since October 17 earlier in the day.

Overall sentiment continues to support the Euro as the Greenback remains under broad pressure as traders look ahead to next week’s Federal Reserve (Fed) meeting, where markets expect policymakers to lower interest rates.

Recent soft US economic data and remarks from key Fed officials expressing concern about the labour market have strengthened expectations for another rate cut. According to the CME FedWatch Tool, markets now assign nearly an 87% probability of a 25 bps cut at the December 9-10 meeting.

A separate Reuters poll offered further insight into market expectations for the Fed’s policy path. In the survey, 89 of 108 economists said they expect the central bank to cut the Fed Funds Rate by 25 bps to the 3.50%-3.75% range at the December 10 decision. Looking further ahead, 50 of 100 economists projected that the rate could fall to the 3.25%-3.50% range in the first quarter of 2026.

Fresh US data released on Thursday provided new insight into labour-market conditions. Challenger Job Cuts dropped sharply to 71.3K in November from 153.1K, pointing to fewer announced layoffs across major industries. Initial Jobless Claims also improved, falling to 191K versus expectations of 220K and down from 218K last week.

On the Euro side, the latest Retail Sales figures released today showed a mixed performance. Eurozone Retail Sales were flat at 0% MoM in October, missing expectations for a 0.1% increase. On a yearly basis, Retail Sales rose 1.5%, slightly above the 1.4% forecast and improving from the 1.2% reading in September.

Looking ahead, the Eurozone calendar on Friday will offer traders more direction, with key releases including Q3 Employment Change and updated Gross Domestic Product (GDP) figures.

In the United States, attention will turn to the September Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge. The day will also bring updates on Personal Income and Personal Spending, followed by preliminary Michigan Consumer Sentiment readings and inflation expectations.