The EUR/USD pair continued its upward momentum on Tuesday, edging toward 1.1645 in the early European session. The move reflects growing confidence that the US Federal Reserve will deliver an interest rate cut at its final policy meeting of 2025, pressuring the US Dollar while offering support to the Euro.

Market participants are positioning ahead of key US data releases scheduled for later in the day, including the ADP Employment Change four-week average and the JOLTS Job Openings covering September and October. These indicators may shape short-term volatility for USD pairs as investors gauge the health of the US labor market.

Fed Expected to Cut Rates by 25 bps, Markets Price in Near-Certainty

The Federal Reserve is widely projected to lower interest rates by 25 basis points, which would bring the benchmark range down to 3.50%–3.75%. According to the CME FedWatch Tool, markets now assign nearly a 90% probability to a quarter-point cut, suggesting strong conviction in the direction of monetary policy.

Traders will pay close attention to Fed Chair Jerome Powell’s press conference and the updated Summary of Economic Projections (SEP), particularly the closely watched “dot plot.” While a rate cut typically weakens the Dollar, many analysts warn that the Fed could deliver a “hawkish cut” by signaling fewer future reductions. Such a stance may provide temporary support for the Greenback and could limit upside potential for EUR/USD.

Euro Supported by Strong German Industrial Output and Improved Sentiment

European fundamentals also contributed to the pair’s rise. Germany surprised markets with stronger-than-expected data, offering a welcome boost to sentiment toward the Euro.

Industrial Production in Germany rose 1.8% MoM in October, outperforming both the previous month’s 1.3% increase and expectations of a 0.4% decline, according to Destatis. The rebound suggests that Europe’s largest economy may be gaining traction after months of stagnation.

In the broader Eurozone, confidence indicators also improved. The Sentix Investor Confidence Index climbed to -6.2 in December, up from -7.4 in November, signaling a gradual recovery in investor outlook across the region.