EURUSD: The USD fell as expectations of interest rate cuts increThe U.S. dollar is on track to decline annually, weakening from two consecutive years of strong gains as expectations grow for the Federal Reserve to cut interest rates next year. The dollar index against six major currencies hit a five-month low of 100.81, reflecting Wednesday's 0.5% decline and expectations for a 2.6% decline for the year.
Market participants are keeping an eye on the timing of the U.S. Federal Reserve's interest rate cut. The futures market indicates that there is an 89% probability that interest rates will be cut by March 2024, and it has been pointed out that there is a possibility that interest rates will be cut by March next year. Despite these forecasts, some analysts, including those at Monex USA, have expressed skepticism about the Fed's willingness to ease early, saying the dollar could appreciate if the expected rate cuts do not materialize. suggested.
In contrast to the Fed's unexpectedly dovish stance at its December meeting, other major central banks, including the European Central Bank, remained committed to keeping interest rates high for a longer period of time. However, markets believe the ECB is considering cutting interest rates by up to 165 basis points next year.
Analysts at Monex USA highlighted the unstable economic situation in Europe and the United Kingdom, predicting that their central banks could cut interest rates before the Fed. The euro rose 0.09% to $1.1113, close to a five-month high and posted a 3.7% annual gain, its best performance since 2020.
