EUR/USD holds steady as mixed US data reinforces cautious Fed outlook

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The Euro (EUR) trades little changed against the US Dollar (USD) on Wednesday, as traders show a muted reaction to a mixed batch of US economic data. At the time of writing, EUR/USD is trading around 1.1691, consolidating after losing around 0.30% on Tuesday.

EUR/USD trades flat as mixed US data fail to spark a fresh direction.
Strong ISM services activity contrasts with signs of labour-market softening.
Markets continue to price a cautious Fed easing path into the year ahead.

The Institute for Supply Management (ISM) reported that the US Services PMI rose to 54.4 in December, beating market expectations of 52.3 and improving from 52.6 in November. The report pointed to improving momentum in the US services sector, with business activity ending 2025 on its strongest footing of the year and remaining in expansion territory for a tenth straight month.

The Employment Index rose to 52 in December from 48.9, returning to expansion territory and indicating that hiring conditions stabilised toward year-end. New Orders strengthened notably, climbing to 57.9 from 52.9. Meanwhile, the Prices Paid Index slipped to 64.3 from 65.4.

While the ISM survey pointed to resilient activity, labour-market indicators pointed to emerging softness. ADP data showed private payrolls rose by 41K in December, below expectations of 47K, though reversing November’s decline of 32K, which was revised down to 29K.

Separately, the JOLTS survey revealed that job openings fell to 7.146 million in November from 7.449 million, undershooting market forecasts of 7.6 million.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 98.60.

From a monetary policy perspective, the mixed data keep the Federal Reserve (Fed) in a wait-and-see mode ahead of its January 27-28 meeting. The pickup in services activity argues against any rush toward aggressive easing, but signs of labour-market softening continue to support the case for gradual rate cuts. Markets remain aligned with a cautious easing outlook, with traders currently pricing in around two interest-rate cuts in 2026.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.