For very good reasons, the market is concerned about possible monetary policy decisions by the Federal Reserve, notes Jane Foley, Senior FX Strategist at Rabobank.
Risk of EUR/USD falling to 1.10
“In July, market expectations for a possible September rate cut by the Fed began to solidify. As a result, since the start of that month, the USD has underperformed all other G10 currencies. There are country-specific factors that have impacted some of the other G10 currencies over this period and provided support to them against the USD. The BoJ raised rates in late July and has maintained a hawkish bias since then.”
“In the UK, the change of government has so far provided support to investor sentiment, while in Australia the RBA has signalled that it maintains a hawkish bias. For some of the G10 currencies, however, it is harder to attribute a positive change in their fundamentals over the summer. The BoC announced consecutive rate cuts in June and July and cut for a third time in September, and the Riksbank and RBNZ both cut rates in August.”
“The ECB announced the second rate cut of the cycle earlier this week and another move is widely expected before the end of the year. The latest ECB staff projections also include a downward revision to Eurozone growth. In our view, while Fed easing expectations will keep the USD at a disadvantage, less supportive Eurozone fundamentals will likely limit EUR/USD’s upside potential going forward. We continue to see downside risk for EUR/USD to 1.10.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
