EURUSD drops 0.3%; economists poll signals lower odds for Fed 'aggressive' rate cuts in 2025 💵

The EURUSD loses more than 0.3% today, and the perspective of limited Fed rate cuts in 2025 'under Trump' appears to be changing investor expectations, clearly in favor of the dollar. As a result, US-Eurozone yield spreads may speak clearly in favor of the US, putting long-term pressure on the euro, where the baseline scenario is to keep inflation at or below 2%, as suggested by ECB member Panetta's statements yesterday. The focus of attention, in the coming months, will be on U.S. tariff policy, and its tightening could, in an extreme scenario, evn halt the Fed's monetary easing, for longer. Also, Wells Fargo Investment Institute raised the 2025-end 10-year treasury yield forecast to 4.50%-5.00% from the prior forecast of 4.00%-4.50%.

Economic survey results 

• The risk of a resurgence of inflation in the U.S. next year has increased, 57 of 67 economists surveyed said.
• The Fed will cut the interest rate by 25 bps in December to 4.25%-4.50% according to 94 of 106 economists.
• The Fed will cut rates to 3.50%-3.75% by the end of 2025, according to the median survey (3.00%-3.25% was expected in October).
• Trump's proposed tariffs will have a significant impact on the U.S. economy, say 44 of 51 economists.
• Economists say China is likely to introduce more stimulus measures to counter Trump's tariffs.
• Trump's proposed import tariffs could reduce China's growth in 2025 by about 0.5-1%. The median estimate is that Trump will impose 38% tariffs on Chinese goods early next year.

EURUSD is trading in a potentially bearish flag pattern and a bottom breakout below 1.054 could indicate another downward impulse.

Source: xStation5