US Dollar Predictions for the Coming Year: What Will Happen to EUR/USD?

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Key Takeaways:

  • 💵 Dollar expected to remain strong after Fed meeting
  • 📈 USD driven by prospect of fewer Fed rate cuts and tariff risks
  • 💶 Euro may trade around $1.05 against greenback in the first half of 2025
  • 🌍 Europe expected to see economic improvement in second half of the year
  • 📉 Significant drop in EUR/USD toward parity possible due to various factors, but short-lived
  • 🔄 Trajectory for EUR/USD to return to middle of trading range or higher in 2H25 based on yield differentials and macro data improvements
  • 💸 Dollar expected to weaken less in the coming year
  • 📉 Forecasted impact on exchange rates
  • 💼 Factors contributing to the dollar’s strength or weakness
  • ⬆️ EUR/USD bounced back above 1.0400 after US PCE inflation data
  • 🇺🇸 Slower-than-expected US inflation weighed on the USD, leading to a fall in the US Dollar Index (DXY)
  • 💵 Fed expected to keep interest rates unchanged in January due to slower inflation and robust economic growth
  • 📊 US GDP grew better than expected, influencing a cautious rate-cut approach by the Fed
  • 💶 Outlook for EUR/USD remains bearish due to declining EMAs and RSI entering bearish range
  • 💲 Core PCE Price Index is key for US inflation analysis and Fed’s monetary policy decisions
  • 📈 GBP/USD rebounds, Gold price increases, Bitcoin faces decline below $100,000 milestone

Forecast on the US Dollar and Euro Exchange Rates

  • The US Dollar is expected to maintain its strength due to the prospect of fewer Federal Reserve rate cuts and potential tariff risks.
  • On the other hand, the Euro may see a slight decline and trade around $1.05 against the greenback in the first half of 2025.
  • Factors such as the progress of the European economy and various geopolitical events will play a critical role in shaping the trajectory of the EUR/USD exchange rate.
  • Despite the possibility of a significant drop in EUR/USD towards parity, experts believe it will be short-lived, with a return to the middle of the trading range or higher expected in the second half of 2025.

Factors Affecting Exchange Rates and Monetary Policy

  • The USD’s strength or weakness is influenced by various factors, including US inflation data, Federal Reserve decisions on interest rates, and global economic conditions.
  • While a slower-than-expected US inflation rate has weighed on the USD recently, robust economic growth has led to a more cautious approach to rate cuts by the Fed.
  • The Core PCE Price Index is a key indicator for analyzing US inflation trends and guiding the Federal Reserve’s monetary policy decisions.
  • The outlook for the EUR/USD exchange rate remains bearish, as evidenced by declining Exponential Moving Averages (EMAs) and the Relative Strength Index (RSI) entering a bearish range.

Market Trends and Price Movements

  • Following the rebound of EUR/USD above 1.0400 after US PCE inflation data, market analysts are closely monitoring any potential fluctuations in the exchange rate.
  • The recent increase in Gold prices and the decline in Bitcoin below the $100,000 milestone have also impacted global markets, alongside the fluctuations in major currency pairs such as GBP/USD.

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