EUR/USD Eyes 1.18 as Powell Faces Early Exit and Fed Cut Pressure

EUR/USD Nears 1.18 as Powell Risks Becoming a 'Lame Duck' Amid Rate Cut Bets

EUR/USD is rapidly gaining ground and now trades just below 1.18, marking a key psychological and technical level not seen for some time. Market sentiment shifted further in favor of the Euro after fresh speculation that Federal Reserve Chair Jerome Powell could be replaced as early as October.

Powell Under Political Pressure

Reports that Donald Trump intends to name a successor to Powell have heightened concerns about central bank independence. As Powell potentially enters his final months at the Fed, investors are questioning whether he has the influence to steer policy independently, raising fears of him becoming a lame duck.

This political instability is fueling speculation of earlier and deeper interest rate cuts, weakening the US Dollar.

Interest Rate Cut Expectations Grow

Over the past week, traders have aggressively repriced expectations for rate cuts. The market now sees nearly 20 basis points of additional easing priced in for December, up from near-zero last week. The divergent views within the Fed, combined with mounting political pressure, are driving a shift toward more dovish monetary policy.

EUR/USD Eyes Breakout Toward 1.18

As the Fed's credibility comes under scrutiny, the EUR/USD pair benefits from the widening policy gap between the ECB and the Fed. Even though the ECB has also signaled room for rate cuts, the Euro is gaining as the Dollar bears the brunt of investor uncertainty.

Key Support/Resistance:

Resistance: 1.1800, 1.1850
Support: 1.1725, 1.1650

What’s Next?

With Fed leadership in question and rate cut speculation intensifying, EUR/USD could test and break through 1.18 in the coming days. Keep an eye on: