empty
18.12.2024 04:09 PM
What to expect from US dollar after Fed's "hawkish cut"

While Wall Street experts puzzle over how the US dollar will react to the nearest Fed's interest rate decision, and the ECB contemplates the future of European inflation, the EUR/USD pair is drifting back and forth within a narrow trading range. Traders are hesitant to jump the gun, reasonably assuming that the Fed's decisions at the end of 2024 could serve as a springboard for the entire forex market, at least through the first quarter of 2025.

According to ECB Chief Economist Philip Lane, the path of inflation in the eurozone remains uncertain. Rising wages, increased corporate profits, and geopolitical tensions could push up energy prices and freight costs, driving the CPI higher. Conversely, a prolonged blow to consumer and business confidence could push inflation down. Tariffs and trade wars could further muddy the waters.

In such conditions, the European Central Bank must remain highly flexible and impartial. Judging by its latest forecasts, the ECB is poised to expect a slowdown in inflation rather than acceleration. This outlook paves the way for further deposit rate cuts and puts pressure on the euro.

ECB's inflation and GDP forecasts

This image is no longer relevant

However, investors are currently more interested in how EUR/USD will react to the outcome of the December FOMC meeting. A 25-basis-point cut to the federal funds rate is expected, bringing it to 4.5%. Additionally, the FOMC's updated projections for 2025 may indicate three monetary easing steps, down from four projected in September.

According to Danske Bank, this could strengthen the euro against the US dollar, as it would signal the Fed's continued intention to ease monetary policy next year.

In contrast, Bank of America predicts a downward move for EUR/USD, describing the December Fed decision as a "hawkish cut." Any hints from Jerome Powell about a January pause or the Fed's concerns over inflation could justify selling the main currency pair.

Forecast for US funds rate

This image is no longer relevant

Curiously, the bond market disagrees with derivatives and expects the updated FOMC forecasts to include the same number of easing moves for 2025 as in previous projections. If so, EUR/USD could likely correct back into its downtrend.

Thus, the wide range of opinions on the Fed's December verdict keeps traders away from the main currency pair, at least until the updated FOMC rate forecasts are released.

This image is no longer relevant

Technical analysis

On the daily chart, EUR/USD is consolidating within a narrow range of 1.0475 to 1.0535. A break below the lower border could resume the downtrend—unless the bulls defend the 1.0455 support and trigger a reversal pattern, such as an Expanding Wedge.

Conversely, a successful breach of the 1.0535 resistance could increase the risk of a pullback and provide grounds for initiating long positions.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/CHF. Analysis and Forecast

On Tuesday, the USD/CHF pair is under selling pressure, pulling back from the weekly high near the key psychological level of 0.8000. This decline is driven by a combination

Irina Yanina 12:47 2025-07-08 UTC+2

What to Watch on July 8th? Fundamental Events Overview for Beginners

No macroeconomic publications are scheduled for Tuesday. However, it cannot be said that the market was idle on Monday despite the lack of key macroeconomic events—there was still enough news

Paolo Greco 11:19 2025-07-08 UTC+2

Markets given breathing room as tariff deadline pushed to August

No need to panic. The market is simply cautious about the White House's return to the tariffs announced on America's Liberation Day. Donald Trump sent letters to various countries specifying

Marek Petkovich 10:14 2025-07-08 UTC+2

GBP/USD Pair Overview on July 8, 2025

The GBP/USD pair declined slightly on Monday, but it's still premature to speak of a downtrend. From a technical standpoint, the pair remains below the moving average line; however

Paolo Greco 08:55 2025-07-08 UTC+2

EUR/USD Review on July 8, 2025

The EUR/USD currency pair traded with a downward bias throughout Monday, although there were likely no solid reasons for the dollar to strengthen again. Let's recall that over the weekend

Paolo Greco 08:37 2025-07-08 UTC+2

GBP/JPY. Analysis and Forecast

During the European session on Monday, the GBP/JPY currency pair is approaching the 198.30 level. The pair finds some support from UK housing data: in June, house prices rose

Irina Yanina 19:40 2025-07-07 UTC+2

XAU/USD. Geopolitical Risks May Provide Additional Support to the Safe-Haven Precious Metal

Today, gold is displaying an intraday bearish tone despite rebounding from the $3300 level. Strengthening demand for the US dollar remains the primary factor pressuring gold, limiting its upward movement

Irina Yanina 19:09 2025-07-07 UTC+2

Bitcoin leads turbulent life

Beneath the calm surface of BTC/USD lie turbulent underwater currents that are reshaping the cryptocurrency market structure. Still waters run deep. On the surface, it seems that life

Marek Petkovich 15:48 2025-07-07 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair maintains a bullish bias, staying above the psychological level of 145.00, reflecting intraday selling pressure on the Japanese yen amid U.S. dollar strength. Investors are concerned that

Irina Yanina 12:59 2025-07-07 UTC+2

USD/CAD. Analysis and Forecast

On Monday, the USD/CAD pair continued its upward movement for the second day in a row. This rise is driven by a combination of factors. Crude oil prices initially declined

Irina Yanina 12:39 2025-07-07 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.