Forex analytics. The dollar needs to be careful. – ForexNews.PRO

The world is full of paradoxes. The financial world is no exception. Unemployment can rise beyond recessions, but when it reaches a four-year high with an economy firing on all cylinders, it’s surprising. Bloomberg experts predict an expansion of US GDP by 3.2% in the third quarter, the leading indicator from the Federal Reserve Bank of Atlanta gives an even higher figure of 3.5%. How can the EURUSD not fall against this background?

A strong economy is a strong currency. The strength of the US economy in 2025 was paradoxically, at first glance, combined with a sharp cooling of the labor market. Employment has replaced inflation in the list of the biggest risks for financial markets in 2026. Investors are ignoring the CPI figures. The Fed prefers the side of its mandate where the labor market is located. It’s not exactly fashionable. It causes fear. And people are afraid of what they don’t understand.

In fact, everything is very clear. Previously, it was believed that tariffs would lead to higher inflation. In fact, they were taken over by American companies that reduce costs. One of the ways is to dismiss employees. Another factor in the divergence between GDP and the labor market is artificial intelligence and related productivity growth.

What does this mean for EURUSD? As long as this combination of a downward trend in employment, a strong economy, and slowing inflation persists, the Fed can cut rates with a clear conscience. But if any component in this equation changes, the central bank’s views will also change. For now, it seems that he intends to pause the cycle of monetary expansion.

According to the president of the Federal Reserve Bank of New York, John Williams, the Fed feels comfortable. This is facilitated by the rate cuts that have already been made. His colleague from the Federal Reserve Bank of Cleveland, Beth Hammack, believes that nothing should be changed, at least until spring. She took the latest inflation figures from the BLS with a pinch of salt and believes that we need to wait for new data.

If the Fed keeps the federal funds rate at its current level until March, as the futures market sees it, and the ECB has ended its monetary policy easing cycle, the differential will remain the same for at least a couple of months. And in this time horizon, the US dollar may strengthen against the euro.

The EURUSD’s reaction to the S&P 500 Christmas rally will also be important. Will it take place at all? And won’t the greenback, which has lost its status as a safe haven asset, grow?