- EUR/USD rebounded to around 1.0400 as the US dollar took a breather after the rally caused by the Fed's hawkish guidance.
- Fed officials expect to cut rates only twice in 2025, fewer than the four originally expected.
- ECB President Bunsch said he was satisfied with market expectations for four 25 basis point rate cuts in 2025.
EUR/USD soared above 1.0400 in the European session on Thursday as US dollar (USD) bulls took a breather after Wednesday's sharp rally. The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against six major currencies, is stuck rising near a two-year high above 108.00. The dollar attracted heavy bidding after the US Federal Reserve (Fed) cut its key borrowing rate by 25 basis points (bps) to 4.25% to 4.50% on Wednesday, as expected, but there are no interest rate cuts next year. It was suggested that the width would be reduced.
In the latest dotplot, the Fed has revised its forecast for the number of rate cuts in 2025 to two from the four expected at its September monetary policy meeting.
Federal Reserve Chairman Jerome Powell cited uncertainty around inflation, easing downside risks to employment and strong economic growth in the second half of the year as factors that are forcing officials to be cautious about cutting interest rates. “We also note that we are moving closer to neutral rates, which is another reason to be cautious moving forward,” Powell added.
Meanwhile, in its latest economic forecast, the Federal Reserve raised its 2025 forecast for the core personal consumption expenditures price index (PCE), the Fed's preferred inflation measure, to 2.5% from the previously expected 2.2%.
Jerome Powell declined to comment on the economic impact of President-elect Donald Trump's immigration, customs and tax policies. “It's very premature to draw any conclusions,” Powell said, adding: “We don't know what the tariffs will be, from which countries, for how long, and at what scale.”
USD price today
The table below shows the percentage change of the US dollar (USD) against major currencies today. The US dollar was the strongest against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.42% | -0.53% | 1.52% | -0.33% | -0.39% | -0.01% | -0.54% | |
| EUR | 0.42% | -0.11% | 1.91% | 0.09% | 0.03% | 0.40% | -0.12% | |
| GBP | 0.53% | 0.11% | 2.04% | 0.20% | 0.14% | 0.51% | -0.01% | |
| JPY | -1.52% | -1.91% | -2.04% | -1.80% | -1.87% | -1.54% | -2.02% | |
| CAD | 0.33% | -0.09% | -0.20% | 1.80% | -0.05% | 0.29% | -0.21% | |
| australian dollar | 0.39% | -0.03% | -0.14% | 1.87% | 0.05% | 0.37% | -0.13% | |
| new zealand dollar | 0.00% | -0.40% | -0.51% | 1.54% | -0.29% | -0.37% | -0.51% | |
| swiss franc | 0.54% | 0.12% | 0.00% | 2.02% | 0.21% | 0.13% | 0.51% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select USD from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents USD (base)/JPY (estimate).
Daily digest of market moves: EUR/USD gains as euro outperforms despite strong dovish ECB view
- EUR/USD weakened on Thursday as the euro (EUR) remained firm against major peers despite guidance from European Central Bank (ECB) officials to continue policy easing into 2025. rose. The ECB has already cut deposit facility rates until 2025. The rate cut will be 100 basis points (bp) to 3%, and a similar rate cut is expected next year.
- Pierre Wunsch, ECB policymaker and head of the National Bank of Belgium, also supports four more interest rate cuts, citing concerns about the growth of the euro zone economy due to U.S. protectionism under the Trump administration. “Four more rate cuts is a meaningful scenario and I feel relatively comfortable,” Wansch said.
- Pierre Winch openly discussed the possibility of parity between the euro and the US dollar to compensate for the 10% tariffs imposed by the US. “If the euro reaches parity against the dollar, there won't be a huge loss in terms of competitiveness,” Wansch said. “If the euro weakens further, the impact of tariffs on growth will ease. ” he added.
- In Thursday's session, the common currency pair will look at the number of first-time U.S. unemployment claims for the week ending December 13th and the third-quarter gross domestic product (GDP) figures to be released at 13:30 Greenwich Mean Time (GMT). This will be affected by the secondary estimates.
- On Friday, investors will pay close attention to US PCE inflation data for November. Core PCE price index data is estimated to have accelerated to 2.9% from 2.8% in October. Monthly inflation is expected to rise by 0.2%, slower than the previously announced rate of 0.3%.
Technical analysis: EUR/USD recovers from 1.0340
EUR/USD rebounded after hitting a more than three-week low of 1.0340 after the Fed meeting. However, the outlook for major currency pairs remains clearly bearish as all short- to long-term exponential moving averages (EMAs) are declining.
The 14-day Relative Strength Index (RSI) has slipped into the bearish range of 20.00-40.00, suggesting that fresh downward momentum has been triggered.
On the downside, the pair could break below the two-year low at 1.0330 before falling to round-level support around 1.0200. On the contrary, the 20-day EMA near 1.0500 will be a key barrier for euro bulls.
