Forex analytics. The euro will postpone plans until better times – ForexNews.PRO
The labor market is stabilizing, inflation is softening, and the economy is moving towards 2% growth. In such circumstances, it is appropriate to ease monetary policy slightly. At the end of the year. Anna Paulson, President of the Federal Reserve Bank of Philadelphia, is inclined to this opinion, and the markets agree with her. Derivatives offer a 70% chance of a reduction in the federal funds rate to 3.5% in June. For about five months, the Fed will sit on the sidelines, which opens the way for EURUSD to the south.
The US economy is really capable of pleasantly surprising. In 2025, it is likely to expand by 2.5%. And this is taking into account the deterrent effect of tariffs, which actually fell on the shoulders of Americans. We need to thank investments in artificial intelligence and the impressive rally in US stock indexes. Due to the wealth effect, consumer spending increased. Is retail sales growth of 0.6% in December any wonder?
The Supreme Court postponed the verdict declaring the tariffs illegal for at least a week. There is a high probability that import duties will have to be refunded. This is definitely a blow to the budget. However, it is also a massive fiscal stimulus. Coupled with the Big and beautiful tax reduction Law, it is able to accelerate the US economy. The question is, will inflation accelerate?
The Fed has already made a mistake once, believing that tariffs will lead to an increase in consumer price growth. In fact, they had a deterrent effect due to a decrease in domestic demand. Stephen Miran, the FOMC’s chief dove, believes that rapid GDP growth is possible without accelerating inflation. One reason may be deregulation, which will increase competition and productivity.
Time will tell who is right. In the meantime, the pause in the Fed’s monetary expansion cycle and hopes for faster economic growth in the United States compared to the eurozone allow the EURUSD bears to dictate their terms. Moreover, TACO comes to their rescue. Donald Trump backed down again, saying that his plans do not include the dismissal of Jerome Powell from the post of Fed chairman.
Alas, the euro has nothing to please its fans with. According to ECB estimates, the US tariffs of 15% will deduct 0.7 percentage points from the economic growth of the eurozone until 2027. Thanks to Germany’s fiscal incentives and increased EU defense spending, the negative was smoothed out in 2025, but it is not known what to expect this year and next.
