EUR/USD remains stable above 1.1650 as worries about Fed autonomy persist

EUR/USD Remains Stable Amid US Political Uncertainty

The EUR/USD currency pair is trading steadily around 1.1665 in the early hours of Tuesday’s Asian session. Market participants are reacting to heightened political tensions in the United States, following threats from President Donald Trump’s administration to bring charges against the Federal Reserve (Fed). This comes after Fed Chair Jerome Powell revealed on Sunday that he is currently the subject of a criminal investigation.

Concerns over the independence of the US central bank are putting pressure on the US Dollar (USD), potentially benefiting the euro. According to Reuters, the US Justice Department is examining possible criminal conduct by Powell related to his June testimony before the Senate about the Fed’s renovation projects. Powell described these allegations as a “pretext” designed to influence the Fed’s monetary policy decisions, particularly regarding interest rates.

Ray Attrill, head of currency strategy at National Australia Bank, commented, “This public confrontation between the Fed and the US administration is clearly damaging for the dollar’s image.”

ECB Policy Outlook Offers Support to Euro

Meanwhile, indications that the European Central Bank (ECB) may be nearing the conclusion of its rate-cutting phase are providing some stability for the euro. Last week, ECB Vice President Luis de Guindos stated that current interest rates are appropriate, though he cautioned that significant geopolitical uncertainties remain.

At present, financial markets anticipate little immediate change, with expectations that interest rates will likely remain steady at the upcoming meeting. Some experts predict a possible rate cut in 2026, but a rate increase appears unlikely given the persistent low inflation environment.

Upcoming US Inflation Data in Focus

Later on Tuesday, investors will be closely watching the release of the US Consumer Price Index (CPI) data for December. Both headline and core CPI are forecast to rise by 2.7% year-over-year. Should inflation figures exceed expectations, the US Dollar could find some short-term support and limit its recent losses.