The dawn of peace between Russia and Ukraine appears, and the euro is expected to challenge the 1.2 level

**Geopolitical turning point drives exchange rate revaluation**

The expectation that the Russia-Ukraine conflict is nearing its end is reshaping the foreign exchange market landscape. This week, the US-Ukraine delegation will significantly simplify their original plans during talks in Geneva, and Ukrainian President Zelensky is preparing to meet with Trump to advance peace negotiations. These developments have sparked market optimism about the conflict's resolution. Driven by this, EUR/USD rose to 1.1596 on Wednesday (November 26), close to the 1.1600 integer level, hitting the highest level since mid-November.

**Dollar under pressure, euro benefits**

The US dollar index fell to 99.65, breaking below the 100 integer mark for the first time. This trend is driven by strong market expectations of a rate cut by the Federal Reserve in December—investors widely bet that the Fed will lower rates by 25 basis points next month. In the dollar index composition, the euro accounts for nearly 60%, so a weakening dollar directly translates into upward momentum for the euro.

As a major member of the Eurozone, France uses the euro as its legal currency, and its economic trends are closely linked to the entire euro area. When European prospects improve, euro-denominated assets tend to attract capital.

**Divergence in central bank policies widens US-Europe interest rate differential**

There are clear differences in monetary policy directions between the European Central Bank and the Federal Reserve. Market analysis suggests that the ECB's rate cut cycle is nearing its end, with a new round of economic forecasts to be released at the mid-December meeting. If inflation data continues to stay below target, the ECB may pause further rate cuts, which would stabilize the euro. In contrast, the Fed's rate cut cycle has just begun, with expectations of significant rate reductions next year. Trump’s team is expected to announce the new Fed chair before Christmas, with Haskett the leading candidate. Once the new leadership takes office, markets widely expect the Fed to implement multiple rate cuts next year.

The 10-year US Treasury yield has fallen back to around 4%, reflecting market optimism about the Fed’s rate cut magnitude next year.

**End of conflict will reshape Europe’s economy**

If the more-than-three-year Russia-Ukraine war comes to an end, its economic impact cannot be underestimated. The resumption of Russian oil exports will lower global oil prices, which is especially important for Europe—lower oil prices will directly improve inflation expectations and economic growth prospects in Europe. Declining energy costs mean increased purchasing power for households and businesses, boosting consumption and investment. Industry forecasts suggest that the end of the conflict could push EUR/USD through the 1.2 level.

**Technical outlook poised for breakout**

The daily chart shows EUR/USD has strong support at the 1.1500 level and has maintained stability for over a month. The MACD indicator has shown a bullish crossover, suggesting that the correction phase since mid-September may be ending. If the price breaks through and stabilizes above 1.1630, further rebound attempts toward 1.1800 are expected, ultimately challenging the 1.2 big level. The current position is close to a key breakout zone, so investors should closely monitor next week’s negotiations and Fed officials’ speeches.