EUR/USD Analysis: Post-Fed Minutes – 27 November 2024

-- A surge in sentiment following Trump's absence of threats to impose tariffs on the Eurozone helped the EUR/USD currency pair rebound to a high of 1.0544.
-- However, the EUR/USD pair quickly returned to its broader downward trajectory, stabilizing around the 1.0460 level at the time of writing.
-- According to reliable trading platforms, the EUR/USD's attempts to rebound were halted after the release of the minutes of the latest meeting of the US Federal Reserve.

The US Central Bank: Cautious in cutting interest

According to the minutes of the latest meeting of the US Federal Reserve, Fed officials indicated broad support for a cautious approach to future US interest rate cuts considering the strength of the US economy and declining inflation. The minutes stated, "Participants expected that if incoming data were consistent with their current assessments, with inflation continuing to move down sustainably toward 2% and the U.S. economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral policy stance over time."

The US Federal Reserve cut its benchmark interest rate by a quarter of a percentage point at its meeting this month to a range of 4.5%-4.75%, following a larger-than-usual half-point cut in September. In the same month, Fed Chairman Jerome Powell stated that the US economy is not sending signals to policymakers that they need to rush to cut interest rates.

Meanwhile, US Federal Reserve officials will meet for their last policy meeting of the year 2024 on December 17 and 18.

[geotargetedbrokercarousel]

US Inflation and Its Impact on Fed Policy

Also, the minutes showed that some officials said the Fed could pause U.S. interest rate cuts and keep borrowing costs at a contained level if U.S. inflation remains high. Some officials have suggested that cuts could be accelerated if the economy or labour market deteriorates. Policymakers also cited the lack of clarity on the so-called neutral rate, a level of policy that neither restricts nor stimulates economic growth, as a reason for caution.

As for the U.S. labour market, U.S. monetary policymakers saw downside risks to employment and growth as “somewhat reduced.” Officials generally assessed that there was “no sign of rapid deterioration” in the U.S. labour market. On inflation, officials reported that price growth has slowed significantly from its peak but noted that the core measure, which excludes food and energy, remains “moderately elevated.”

You should expect inflation rates to increase during the Trump administration as his trade wars will inevitably result in higher inflation rates.

Euro outlook remains cautious

Investors remain cautious due to the ongoing economic gloom in Europe and growing concerns about the potential impact of the incoming Trump administration. Before taking office, Trump doubled down on his threats to impose tariffs, indicating a 10% increase in tariffs on China and a 25% increase on Mexico and Canada. At the same time, he also warned of imposing large tariffs on European goods, especially cars, claiming that the European Union "will pay a big price."

As is well known, these threats increase the challenges facing Europe's struggling manufacturing sector. Overall, this gloomy outlook has prompted investors to increase bets on aggressive monetary easing by the European Central Bank. While a 25-basis point interest rate cut next month is fully priced in, the probability of a larger 50 basis point cut has risen to 58%. These factors will continue to weigh on the performance of the euro.

[graph_5754]

EUR/USD Analysis Today:

There is no change in our technical view of the performance of the euro against the US dollar EUR/USD. Technically, the general trend remains bearish and the expectations for the future parity rate of the most popular currency pair in the forex market are increasing and closer than before. The implementation of Trump's threats and global geopolitical tensions, in addition to the worsening economic and political situation in Germany, will remain valid factors for further collapse of the Euro Dollar price in the coming months. Currently, the closest support levels for the Euro Dollar are 1.0400, 1.0335 and 1.0200, respectively, which are sufficient to push all technical indicators towards strong oversold levels.

Today, the Euro Dollar pair will be affected by the announcement of a package of important US economic data before tomorrow's holiday, the most prominent of which are the US GDP growth reading, the number of weekly jobless claims, and US durable goods orders, in addition to the US Federal Reserve's preferred inflation reading.

EUR/USD Trading Signals:

In the above-mentioned narrative, we recommend selling the Euro Dollar currency pair EUR/USD from every upward level.

Ready to trade our daily EUR/USD Forex analysis? We’ve made a list of the best forex demo accounts worth trading with. ;

Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.