Top.Mail.Ru
empty
 
 
15.01.2025 12:55 AM
The Euro Sees Light at the End of the Tunnel

The dollar is often viewed as the currency of pessimists, gaining strength during uncertain times for the global economy. Recent tariff threats from Donald Trump have contributed to a bleak outlook for global GDP. While many may consider retaliatory measures, a large-scale trade war would likely be detrimental to riskier assets. However, as rumors of a phased implementation of tariffs began to circulate in the Forex market, investors transitioned from a stance of pessimism to one of moderate optimism.

According to Donald Trump's team, headed by Scott Bessent, tariffs ranging from 2% to 5% are not expected to significantly accelerate inflation or impede the growth of foreign economies. Other countries may hesitate to retaliate, particularly since the U.S. could choose to increase tariffs further. This phased approach suggests that the gap in GDP growth between the U.S. and the Eurozone may not be as large as initially thought. This factor could, at the very least, slow down the EUR/USD bears.

Dynamics and Forecasts for the U.S., UK, and Eurozone Economies

This image is no longer relevant

The issue at hand is the unpredictability of Donald Trump's actions. Will he deny Bloomberg's insider report, as he did with The Washington Post's article based on informed sources a week prior? The Republican president is known for making last-minute reversals and often chooses to disregard advice rather than follow it, leading to uncertainty about the details of the initial tariff package. Consequently, market sentiment could quickly shift from moderate optimism to pessimism, which would bolster the U.S. dollar.

Additionally, EUR/USD bears are supported not only by the divergence in economic growth between the U.S. and the Eurozone but also by the differences in their monetary policy trajectories. U.S. inflation is rising, even in the absence of tariffs and fiscal stimulus from Donald Trump, as indicated by Bloomberg's December Consumer Price Index (CPI) forecasts and increasing inflation expectations. The futures market suggests that the Federal Reserve is unlikely to cut the federal funds rate until October.

U.S. Inflation Expectations Dynamics

This image is no longer relevant

European Central Bank Chief Economist Philip Lane is expressing significant concern about the potential return of deflation in the Eurozone. He stresses the importance of continuing the monetary expansion cycle as quickly as possible. Meanwhile, other ECB officials anticipate that borrowing costs will reach a neutral level of 2%—a rate that neither stimulates nor constrains the economy—by May.

This image is no longer relevant

By summer, the interest rate differential between the Fed and the ECB could widen from the current 150 basis points to 250 basis points. This shift may drive the EUR/USD exchange rate below parity.

From a technical perspective on the EUR/USD daily chart, the appearance of a pin bar with a long lower shadow suggests a potential bullish counterattack. However, for this to materialize, bulls need to maintain control over the lower boundary of the fair value range, which is between 1.025 and 1.044. If they succeed, it may justify short-term buying. If not, selling the euro remains the more prudent strategy.

Gana con los cambios en el valor de las criptomonedas con InstaForex.
Descarga MetaTrader 4 y abre tu primera operación.
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    UNIRSE AL CONCURSO
  • Depósito al azar
    ¡Haga un depósito en su cuenta de $3,000 y obtenga $10000 más!
    ¡En Enero, sorteamos $10000 dentro de la campaña Depósito afortunado!
    Obtenga la oportunidad de ganar depositando $3,000 en una cuenta de operaciones. Tras haber cumplido esta condición, se convertirá en un participante de la campaña.
    UNIRSE AL CONCURSO
  • Opere de forma inteligente, gane un dispositivo
    Recargue su cuenta con al menos $500, regístrese en el concurso y tenga la oportunidad de ganar dispositivos móviles.
    UNIRSE AL CONCURSO
  • 100% de bonificación
    Su oportunidad única de obtener un bono del 100 % en su depósito
    OBTENER BONO
  • 55% de bonificación
    Solicite un bono del 55% en cada depósito
    OBTENER BONO
  • 30% de bonificación
    Reciba un bono del 30% cada vez que recargue su cuenta
    OBTENER BONO

Recommended Stories

¿No puede hablar ahora mismo?
Ingrese su pregunta en el chat.
Widget callback