EUR/USD falls to near 1.1500 despite cautious ECB policy outlook

• EUR/USD loses ground as the US Dollar receives support from the Fed's cautious policy stance.
• The CME FedWatch Tool suggests pricing in a 65% probability of a Fed rate cut in December.
• Traders expect no further ECB interest rate moves this year.

EUR/USD extends its losing streak for the fifth successive session, trading around 1.1510 during the Asian hours on Tuesday. The pair depreciates as the US Dollar (USD) gains support amid cautious sentiment over the US Federal Reserve (Fed) policy stance for December.

Fed Chair Jerome Powell said last week during the post-meeting press conference that another rate cut in December is far from certain. Powell also cautioned that policymakers may need to take a wait-and-see approach until official data reporting resumes. Fed funds futures traders are now pricing in a 65% chance of a cut in December, down from 94% a week ago, according to the CME FedWatch Tool.

The US Dollar may face challenges as traders adopt caution due to the prolonged government shutdown, which could fuel economic concerns in the United States (US). The US government impasse has now entered its sixth week with no easy endgame in sight amid a deadlock in Congress on the Republican-backed funding bill. Meanwhile, federal workers across the country are going unpaid, adding to the uncertainty surrounding the economic picture.

However, the downside of the EUR/USD pair could be restrained as the Euro (EUR) may receive support from market expectations of no further interest rate moves by the European Central Bank (ECB) this year.

The ECB kept interest rates unchanged for the third consecutive meeting in October, held last week, as expected, noting that the inflation outlook remains broadly stable, the economy continues to grow, and uncertainty persists. Earlier data indicated that Eurozone inflation eased to slightly above the ECB's 2% target, while third-quarter GDP growth surpassed expectations. Additionally, October business surveys indicated an improvement in overall sentiment.

ECB policymaker Francois Villeroy de Galhau noted that the central bank is in a good position after the October policy decision. However, Villeroy added that this position is not a fixed one. Governor of the Central Bank of Latvia, Martins Kazaks, said that risks to inflation and growth in the Eurozone are more balanced. Kazaks added that the central bank would act when necessary but should avoid reacting hastily.