Forex analytics. The dollar is back at the top – ForexNews.PRO
What we fought for, we ran into. The increase in beef prices to record levels, the rise in the cost of ground roasted coffee from $6.47 per pound a year ago to $9.14 forced the White House to reduce tariffs on these and other agricultural and food products. If the rise in import duties on the Day of America’s Liberation provoked a drop in the USD index, then reducing them in theory should have the exact opposite effect. Should the EURUSD retreat be surprising?
In fact, he’s working out the worst possible scenario. After Donald Trump returned to the White House, there was a lot of talk that the tariffs were inflationary and would force the Fed to keep rates high. This will lead to a strengthening of the US dollar. In fact, the greenback weakened as the risks of a slowdown in GDP increased due to the absorption of import duties by the Americans.
The markets are now returning towards the end of 2024 and the beginning of 2025. More and more FOMC members are expressing concern about inflation. Hawkish rhetoric is being heard more often and more strongly, which has lowered the chances of a federal funds rate cut in December to less than 50%.
For a whole week, the US dollar did not react to the drop in the probability of a continuation of the monetary expansion cycle at the end of the year. This was due to the closure of carry positions by traders amid rising volatility, stock index corrections and a deterioration in global risk appetite. Greenback has been used as a profitable currency for a long time, and the withdrawal of players on the difference from the market did not allow the “bears” on EURUSD to raise their heads. However, nothing lasts forever. Forex is starting to play out the factor of reducing the chances of a Fed rate cut in December, which plays into the hands of the USD index.
The same can be said about investors avoiding hedging. According to a MillTech survey of 250 companies, the risk insurance ratio decreased from 57% in the second quarter to 46% in the third quarter. The degree of trade uncertainty has decreased, and the need to sell American dollars in the futures market has also decreased.
No matter how the reduction in tariffs accelerates inflation even more! According to UBS, the Americans’ belief that they are the ones paying for import duties will be reinforced by this move by the White House. As a result, inflation expectations will rise, which will enable retailers to raise prices even further.
