Forex analytics. Dollar disappointed with TACO – ForexNews.PRO
The EURUSD rally looks illogical against the background of strong macro statistics in the United States, which makes it possible for the Fed to extend the pause in the cycle of monetary expansion. Moreover, concerns about the loss of independence by the central bank due to loyalty to Lisa Cook of the Supreme Court have decreased, and Donald Trump has retreated from his intention to seize Greenland. Analysts are trying to explain the fall in the greenback by an increase in global risk appetite, however, due to higher interest rates and the uncertainty of the White House’s policy, it is the dollar that is the riskier asset, rather than the euro.
The sale of America gave way to TACO, American stocks and bonds rose, but not the USD index. Amazing? Yes! Moreover, the GDP data for the third quarter was revised upward to 4.4%. The economy accelerated from 3.8% in the second quarter, and for the fourth quarter, the leading indicator from the Federal Reserve Bank of Atlanta gives an impressive figure of 5.4%! Applications for unemployment benefits do not want to grow, which signals a stabilization of the labor market. The personal consumption expenditure index stood at 2.8%.
This state of affairs indicates only one thing – the Fed will not budge until June. The rate differential with the ECB will remain wide, carry traders can sell the euro and buy the dollar with a clear conscience. But for some reason, the EURUSD shot up. What is the reason?
The first version is that the United States has rendered Europe an inconvenient service. For a long time, Washington has been demanding that Brussels increase defense spending. The EU nodded, but did nothing until 2025. After Donald Trump’s antics with Greenland, it became clear that the old international order had been shaken. You need to pull yourself out of the swamp by your hair. Hopes for increased budget spending and fiscal stimulus support the euro.
The second version is that the White House is really afraid of selling off American assets. Donald Trump threatens to retaliate against Europe if it does so. Scott Bessent is pursuing the Deutsche Bank analyst who expressed this seditious idea.
Finally, the third version is, in my opinion, the most plausible. TACO discredits itself. In order for Trump to retreat, a serious drop in stock indexes is needed. And investors are so convinced that this will happen that the markets are not falling much. So, the owner of the White House got the opportunity to repeat his antics. The Kalshi betting market gives a 44% probability of US control over Greenland. Yes, the odds dropped from 60% before Davos, but they are still high.
