Forex analytics. The dollar knows the enemy by sight – ForexNews.PRO
Inflation is yesterday’s problem, and today and tomorrow we need to worry about the cooling of the labor market in a strong economy. This is the opinion of BlackRock CEO Rick Ryder, one of the candidates for the post of the new head of the Federal Reserve. However, the central bank has long believed so. He lowered the federal funds rate three times in 2025, even amid high prices. Nevertheless, Donald Trump claims that there is a bad person in the Federal Reserve.
In December, consumer prices rose 0.3%, and core inflation rose 0.2% mom, which was lower than 62 of the 73 forecasts in the Bloomberg survey. This allowed the president to declare that economic growth is exploding, productivity is skyrocketing, investment is booming, and inflation has been defeated. Thanks to the tariffs! Revenues from which, by the way, in 2025 amounted to $264 billion, which is $185 billion more than in 2024. As a result, the budget deficit decreased to $1.67 trillion, which is the lowest in three years.
We’ll be screwed if the Supreme Court cancels the fees. That’s what Donald Trump says. Billions of dollars will have to be returned, and other countries will refuse to invest in the US economy. In fact, the tariffs fell on the shoulders of American companies and were absorbed by American consumers, so their cancellation is a kind of fiscal incentive. Which will accelerate GDP rather than slow it down. It becomes clear why EURUSD is falling on the eve of the Supreme Court verdict.
The strength of the economy, the stabilization of the labor market and inflation above the 2% target give the Fed reason to hold rates. According to Albert Musalem, president of the St. Louis Federal Reserve Bank, they are at a neutral level, and monetary policy is well positioned. After the unemployment rate fell to 4.4% in December, CME derivatives shifted expectations of a resumption of the monetary expansion cycle from March to June, which strengthened the US dollar.
There are more and more bets on the futures market that the Fed will not change anything in monetary policy until the end of 2026. If so, the wide differential in US and German bond yields will be a damning verdict for the EURUSD.
The only one who can prevent the pair from falling is Donald Trump. The president wants to achieve a reduction in the cost of borrowing to 1% and is doing everything possible and impossible for this. At such rates, not only will inflation accelerate, but there will also be an outflow of capital from the United States, which will bring down the dollar.
