EUR/USD: Weaker US Dollar Ahead of US November Elections – ING

Financial markets have taken the view that the Federal Reserve has allowed too much time to cut rates and that a US recession is likely, say ING FX analysts Francesco Pesole and Chris Turner.

American exceptionalism is finally waning

“We are not as bearish as some, but we expect the Fed to begin easing tightening conditions with a 50bp rate cut on September 18, followed by 25bp cuts in November and December. We see the policy rate falling to 3.50% next summer. This should be broadly bearish for the USD, although the US elections in November will be crucial.”

“Our near-term forecast is for equity markets and volatility to stabilise, allowing EUR/USD to trade above 1.10 as it reconnects with rate differentials. Indeed, we are looking for an orderly decline in the USD.”

“The eurozone economy is not looking great, but we are now in a convergence story. ‘American exceptionalism’ is finally waning.”

Source: Fx Street

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