Forex analytics. Dollar packs his bags – ForexNews.PRO
The path will be mastered by the one who walks. The futures market continues to reduce the chances of a federal funds rate cut in December, but still sees it falling to 3.25% in the current cycle of monetary expansion. Stock indexes are scared by the change in investors’ views on the fate of borrowing costs in 2025, they are falling. Global risk appetite is deteriorating, but the EURUSD has stopped growing. Carry traders have closed trades, the US dollar has strengthened and is ready to be tested by the FOMC meeting minutes and employment statistics.
As many people as there are opinions. If Nordea believes that the Fed’s rate will fall to only 3.75%, then Morgan Stanley expects it to be cut by 75 bps in 2026. Moreover, the main impact will be in the first half, when the pressure of the White House on the central bank will increase, and Jerome Powell will resign. As a result, the EURUSD will rise to 1.23 in January-June, only to fall to 1.16 by the end of next year.
Morgan Stanley is not alone. Nordea also expects the euro to strengthen, even despite the limited potential of the Federal Reserve’s monetary expansion. The acceleration of the eurozone economy under the influence of fiscal incentives will play into the hands of EURUSD. While the US GDP will slow down.
In fact, the ECB, the IMF, and the European Commission raised their forecasts for the currency bloc’s economy for 2025, but lowered them for 2026. High tariffs and uncertainty, as well as a strong euro, will put a spoke in the wheels of GDP. If so, the EURUSD rally potential looks limited.
Those who don’t make mistakes don’t work. If the eurozone were to accelerate properly under the influence of Germany’s fiscal stimulus, the Fed would continue to cut rates as early as December, and in the first half of the year it would be possible to see the euro at $1.25. However, there is another scenario. In which the weakness of the economy forces the ECB to resume the cycle of monetary expansion. The deposit rate drops from 2% to 1.5%, EURUSD returns below 1.1.
Investors prefer to live for today. They wind down the carry trade, exit long positions on stock indexes on the eve of important events and keep their ears open. The split in the Fed’s ranks has been known for a long time. Christopher Waller still insists on a rate cut in December, but the growing chorus of “hawks” is forcing the futures market to reduce the chances of such an outcome to 42%.
Traders expect to receive hints from the minutes of the October FOMC meeting and statistics on September employment outside the US agricultural sector. Bloomberg experts expect it to accelerate from 22 thousand to 50 thousand.
