EUR/USD is expected to continue weakening by many experts because of the comparative outlook for interest rates, which drive capital flows. Interest rates are expected to remain higher in the US compared to Europe, making it a more attractive place to store capital, thereby increasing inflows and Dollar-demand.
On the US side, stubbornly high inflation, a robust jobs market and strong economic growth are all reasons to keep interest rates at their current level (5.25%-5.50%).
“It is hard to find any reasons to bet against the Dollar,” said Michael Pfister, FX Analyst at Commerzbank in an interview with Bloomberg News on Monday. “We have seen an appreciation in the Greenback over the last two weeks on the back of an inflation surprise. On top of that we have a strong growth advantage and a very hawkish Fed,” added the analyst.
Pfister sees the Federal Reserve (Fed) not making a first rate cut until December, which is a big change from expectations earlier this year, when the consensus was that the Fed would make its first interest rate cut in June. The Fed themselves, in their last Summary of Economic Projections (SEP), forecast about three 0.25% cuts over the whole of 2024.
This contrasts with Europe, where disinflation has been stronger and economic activity weaker. Additionally, officials at the European Central Bank (ECB) which sets base lending rates for the entire region (currently at 4.5%), appear more united in advocating for a cut in June, compared to their colleagues across the Atlantic.
“To be honest, I am often surprised that the Euro is not much weaker,” says Ulrich Leuchtmann, Head of FX and Commodity Research also at Commerzbank in a note on Monday.
“Over the weekend, news services reported in advance on an interview with François Villeroy de Galhau, Governor of the Banque de France. According to these reports, Villeroy confirmed the ECB Governing Council's intention to cut interest rates at its meeting on June 6,” adds Leuchtmann.
면책 조항: 본 게시글에 표현된 견해는 전적으로 작성자의 견해이며 Followme의 공식 입장을 대변하지 않습니다. Followme는 제공된 정보의 정확성, 완전성 또는 신뢰성에 대해 책임을 지지 않으며, 서면으로 명시적으로 언급되지 않는 한 해당 내용을 기반으로 취해진 어떠한 조치에 대해서도 책임을 지지 않습니다.
