• EUR/USD remains exposed to downside as the US Dollar strengthens following Kevin Warsh’s nomination as Fed Chair.
• US producer inflation strengthened, drifting further from the Fed’s 2% target and reinforcing its policy stance.
• Eurozone economy grew 0.3% QoQ by December 2025, while Germany rebounded to 0.3% growth in Q4.

EUR/USD edges modestly higher after opening with a downside gap, trading near 1.1840 during Monday’s Asian session. However, the pair remains vulnerable to further downside as the US Dollar (USD) finds support following President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) Chair. Markets interpreted the appointment as signaling a more disciplined and cautious approach to monetary easing, lifting long-end Treasury yields and weighing on rate-sensitive assets after January’s strong rally.

US producer-side inflation firmed, moving further away from the Federal Reserve’s 2% target and reinforcing the central bank’s policy stance. Data from the US Bureau of Labor Statistics showed PPI inflation holding steady at 3.0% year-over-year (YoY) in December, unchanged from November and above expectations for a moderation to 2.7%. Core PPI, excluding food and energy, accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.

St. Louis Fed President Alberto Musalem noted that additional rate cuts are unnecessary at this stage, describing the current 3.50%–3.75% policy rate range as broadly neutral. Echoing this sentiment, Atlanta Fed President Raphael Bostic called for patience, emphasizing that policy should remain somewhat restrictive.

The Greenback also gained traction as risk sentiment improved after the US Senate reached an agreement to advance a government funding package, thereby averting a shutdown, according to Politico.

In the Eurozone, the economy expanded by 0.3% quarter-on-quarter in the three months to December 2025, matching the previous quarter’s pace, according to Eurostat’s preliminary estimate released Friday. GDP rose 1.4% YoY in Q4, unchanged from Q3 and exceeding expectations of 1.2%. Meanwhile, the unemployment rate edged lower to 6.2% in December from 6.3%.

Germany’s economy grew by 0.3% QoQ in Q4 2025, rebounding from flat growth in the third quarter, preliminary data from Destatis showed. This outperformed market expectations of 0.2%. On an annual basis, GDP increased by 0.4% YoY, up from 0.3% in Q3 and also above the 0.3% consensus forecast.