Forex analytics. The dollar was swept away by a torrent of events – ForexNews.PRO
A long sleep, a stormy awakening. Either Forex missed the data so much because of the shutdown, or a new narrative is forming on the market that will radically change the fate of the US dollar. The multidirectional dynamics of the EURUSD at the beginning of the year suggests that investors are reconsidering their views, taking into account the incoming news. They are trying to make sense of the turbulent flow of events.
The theory of greenback’s increased sensitivity to data is supported by its decline in response to disappointing statistics on business activity in the manufacturing sector and Neil Kashkari’s dovish rhetoric. However, just the next day, Thomas Barkin’s statement that rates were at a neutral level and would stay there for some time reduced the chances of cutting them in March from 51% to 45%. The US dollar has fallen.
The market did not react at all to Stephen Miran’s words about restrictive monetary policy and the required reduction in borrowing costs by 100 bps or more. This is Donald Trump’s man, and whether the US president will be able to reshape the FOMC in 2026 is a big question.
Pressure on the euro was exerted by the slowdown in German inflation from 2.6% to 2% in December, which strengthens the position of the ECB’s “doves”, Friedrich Merz’s words that some sectors of the German economy are in critical condition, as well as the resuscitation of the political crisis in France. The country’s finance ministry has stated that without parliamentary approval of the draft budget, the deficit could reach 5.4% of GDP. Although it is critically important to reduce it to less than 5%. According to JP Morgan, Paris, Vienna and Brussels face a 50% chance of a credit rating downgrade in 2026.
If the Fed puts the rate-cutting process on hold, and the weakness of the economy, including due to policy, forces the ECB to return to monetary expansion, the future of the EURUSD will not be as bright as expected. Moreover, the risks of the failure of diplomacy for peace in Ukraine are increasing.
The United States demands a complete political restructuring from Venezuela. Cooperation only with them, severing ties with China, Russia, Iran and Cuba. Donald Trump said that India does not like tariffs, and it is reducing oil imports from Russia. Moscow, in turn, is sending a submarine to the shores of Venezuela.
If we add to this the risks of capturing Greenland and the President of Colombia, we can think about forming a new doctrine of “peace through force.” This is fraught with a deterioration in the global economy and a flight to the US dollar.
