Federal Reserve rate cuts significantly impact the EUR/USD currency pair, as they weaken the U.S. dollar by lowering interest rates, making dollar-denominated assets less attractive to investors. A rate cut typically leads to capital outflows from the USD, increasing demand for the euro and driving the EUR/USD exchange rate higher. Lower interest rates also stimulate borrowing and spending in the U.S., potentially boosting economic growth but increasing inflation risks. Meanwhile, the European Central Bank’s (ECB) monetary stance plays a crucial role in determining how much the euro strengthens relative to the dollar. However, other factors such as economic data, geopolitical events, and market sentiment can influence price movements. Traders closely monitor Fed statements and economic indicators to anticipate future rate changes and adjust their Forex strategies accordingly.