The EUR/USD pair gains ground to near 1.0350 during the early European session on Wednesday. However, the potential upside of the major pair might be limited amid the prospects for slower interest rate cuts by the Federal Reserve (Fed) in 2025. The Federal Open Market Committee (FOMC) Minutes will be closely monitored later in the day. 

The upbeat US economic data could give the US central bank ample room to continue leaving interest rates higher for longer, supporting the Greenback. The US Services Purchasing Managers Index (PMI) rose to 54.1 in December versus 52.1 prior, according to the Institute for Supply Management (ISM) on Tuesday. This reading came in above the market consensus of 53.3. Meanwhile, US JOLTS Job Openings increased to 8.09 million in November, compared to 7.83 million in October. The market expected 7.7 million Job Openings in November. 

Additionally, hawkish comments from the Fed officials might contribute to the USD’s upside. Federal Reserve Bank of Atlanta President Raphael Bostic said on Tuesday that inflation is expected to gradually decline this year to the Fed’s 2% target. However, Fed policymakers should be cautious with policy decisions given uneven progress on lowering inflation and err on the side of keeping interest rates elevated to achieve their price stability goals. Earlier on Monday, Fed Governor Lisa Cook noted Fed officials can move more cautiously with interest rate cuts, pointing to a sturdy labor market and sticky inflation.

Across the pond, markets continue to anticipate aggressive European Central Bank (ECB) rate cuts in 2025 despite the rise in inflation. This, in turn, might exert some selling pressure on the Euro (EUR) against the USD. The ECB is expected to cut rates by 25 basis points (bps) at the next meeting on January 30. For the whole year, traders are expecting slightly more than 100 bps of cumulative cuts. 

Later on Wednesday, traders will keep an eye on the German Retail Sales, along with the Eurozone Consumer Confidence and Producer Price Index (PPI). If the report shows a stronger-than-expected outcome, this could lift the shared currency. 

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