Forex

EUR/USD Exposed to Fresh 2024 Lows on Unfavorable Monetary Policy

Nikos Tzabouras Written by Nikos Tzabouras

EUR/USD Analysis

The US Federal Reserve made a hawkish shift last week, despite the third straight rate cut since September's outsized pivot. The focus on the labor market proved premature, as unemployment is still relatively low, the economy is doing fine and the disinflation process stalls. Policymakers now expect just 50 bps of cuts next year [1], a marked climb-down from the previous 100 bps projection.

At the same time, Trump's return to the White House threatens to spark reflation, as the side-effect of his tax cuts and protectionist agenda. The already frail European economy could take a big hit from tariffs, as the US is the bloc's largest trading partner. This could lead the European Central Bank to a forceful easing path next year and another 100 bps of cuts looks reasonable. Policymakers remained non-committal after the last cut [1], but the direction of travel is clear.

EUR/USD avoided fresh 2024 lows during last week's decline, as the less-hot than expected US PCE inflation help it found some reprieve. Further rebound towards the EMA200 (black line) would not be surprising, but the common currency does not inspire confidence for sustained recovery and the upside is unfriendly. The monetary policy dynamics and the technical landscape make EUR/USD vulnerable to new 2024 lows (1.0331) that would open the door to further losses towards 1.0187.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.

As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.

References

1

Retrieved 23 Dec 2024 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20241218.htm

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