empty
21.03.2025 12:45 AM
The Dollar Takes Back Its Own

Markets shoot first and ask questions later. Upon hearing Jerome Powell's assurance that the Federal Reserve had everything under control and that there would be no recession, U.S. stock indices rose. Along with them, EUR/USD quotes climbed as well. As the currency of optimists, the euro gained an advantage due to an improvement in global risk appetite—an effect that, unfortunately, won't last long. Alongside the decline, another bad sign for the main currency pair is stagflation, precisely the scenario the Fed has outlined.

The long-term federal funds rate forecasts remained unchanged. The FOMC expects two rate cuts in 2025, another two in 2026, and one more in 2027. The total scale of monetary easing is estimated at 125 basis points. At the same time, Jerome Powell called the inflation triggered by tariffs temporary or transitory. The Fed can afford not to intervene in this process—prices will come down on their own over time.

Fed Rate Trends and Forecasts

This image is no longer relevant

Markets calmed down, but within a day, they recalled the events of 2021. Back then, the Fed also described high inflation in the U.S. as transitory. The argument was that the surge in economic activity following the COVID-19 pandemic would subside, leading to a drop in consumer prices. However, when CPI surged to nearly 10% in 2022, Powell and his colleagues swiftly changed their stance. They launched the most aggressive monetary tightening in four decades, which enabled the U.S. dollar to win the G10 currency race in 2024 and remain one of its leaders in 2023.

History is repeating itself. There is nothing more permanent than the temporary. Tariffs risk pushing consumer prices to new highs, forcing the Fed to abandon its forecasts. This could result in maintaining the federal funds rate at 4.5% until the end of 2025, as the OECD and Fitch Ratings urged. If that happens, after its sharp rally in the first two decades of March, EUR/USD risks plunging off a cliff.

Especially since the U.S. and the European Union stand on the brink of a trade war by imposing tariffs on steel and aluminum, the White House forced Brussels to respond. However, the retaliation did not sit well with Donald Trump. The Republican threatened to introduce a 200% tariff on European alcoholic imports. In response, the EU backed down, postponing tariffs on U.S. whiskey imports until mid-April—ostensibly to allow negotiations aimed at preventing economic pain for both sides.

This image is no longer relevant

I fear that Trump is not concerned with the EU's maneuvering. The U.S. president has declared April 2 as America's Liberation Day, hinting at sweeping reciprocal tariffs. Europe is unlikely to emerge unscathed.

From a technical standpoint, a reversal pattern called Anti-Turtles has been activated on the EUR/USD daily chart. Short positions on the euro against the U.S. dollar, formed from the 1.089 level, should be maintained and periodically increased. Target levels are set at 1.0805 and 1.0720.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

What to Pay Attention to on June 10? A Breakdown of Fundamental Events for Beginners

There are a few macroeconomic reports scheduled for Tuesday. The economic event calendars for both the Eurozone and the United States are empty, while the UK will release reports that

Paolo Greco 06:40 2025-06-10 UTC+2

GBP/USD Overview – June 10: A New Trial for Trump

The GBP/USD currency pair showed no interesting movements on Monday. However, given the current situation in the U.S., it's hard to envision any growth for the dollar. It turns

Paolo Greco 04:11 2025-06-10 UTC+2

EUR/USD Overview – June 10: Riots, Protests, Unrest

The EUR/USD currency pair traded very sluggishly on Monday. That's unfortunate because the news background becomes more interesting each day. This time, the news was not about trade tariffs

Paolo Greco 04:11 2025-06-10 UTC+2

EUR/USD: Calm Before the Storm? The Market Awaits News from London

The EUR/USD pair continues to trade within a 100-pip price range of 1.1350–1.1450, bouncing between its boundaries. Buyers are trying to hold within the 1.14 area, while sellers

Irina Manzenko 00:38 2025-06-10 UTC+2

The Dollar Feels Its Strength

A strong economy means a strong currency. In early June, the U.S. economy began to look strong again. EUR/USD bears anticipate a correction in the current upward trend, prompted

Marek Petkovich 00:38 2025-06-10 UTC+2

Strong Employment Report Supports the Canadian Dollar

Net employment change in May amounted to +8.8 thousand jobs, exceeding April's growth and presenting very strong data, especially against expectations — a loss of about 15 thousand jobs

Kuvat Raharjo 15:05 2025-06-09 UTC+2

AUD/USD. Analysis and Forecast

At the beginning of the new trading week, the AUD/USD pair is showing steady upward momentum, recovering from a slight pullback and once again approaching the highs seen in November

Irina Yanina 14:51 2025-06-09 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair is showing moderate weakness on Monday, dropping toward the psychological level of 144.00. The decline is driven by a combination of factors, including the strengthening

Irina Yanina 14:05 2025-06-09 UTC+2

WTI - West Texas Intermediate. Analysis and Forecast

At the start of the new week, prices for West Texas Intermediate (WTI) crude oil are attempting to stay near Friday's highs. Senior U.S. officials, including Treasury Secretary Scott Bessent

Irina Yanina 14:02 2025-06-09 UTC+2

Old Donald the Fighter Seems to Have Broken Down (there is a likelihood of continued growth in CFD contracts #NDX and #SPX)

Despite all the hardships, uncertainty, and overall market tension, stock indices persistently climb higher. Investors believe that Donald Trump will have to back down and retreat in his confrontation with

Pati Gani 10:06 2025-06-09 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.