There was a notable change in market perceptions concerning the tempo and amount of potential Fed and ECB charge cuts in latest weeks, Rabobank’s FX analyst Jane Foley notes.
Newest developments underpin draw back dangers for EUR/USD
“Hypothesis that the Fed may observe September’s 50 bps charge minimize with one other equally sized transfer has been blown away by a spherical of information pointing to a resilient US financial system. As an alternative, discuss has emerged that the FOMC may be minded to chop charges solely as soon as extra earlier than the top of the 12 months.”
“In contrast, the market is deciphering remarks from some ECB officers as signalling that they’re now comparatively comfy with the Eurozone’s inflation outlook and are as an alternative turning their consideration in the direction of the necessity to assist development within the area. The end result has been heightened hypothesis a few potential faster tempo of ECB easing and even the deployment of a bigger 50 bps rate of interest minimize.”
“The resultant downward strain on EUR/USD has been compounded by a renewed curiosity within the greenback supportive ‘Trump commerce’. We not too long ago revised down our forecasts for EUR/USD and newest developments underpin draw back dangers for the forex pair.”