Selling EUR to USD As the Buck Keeps Pushing Ahead of the FOMC

The rate of EUR to USD continues to fall after EUR/USD failed to reach 1.10 last week. The FOMC meeting is having a positive impact on the US dollar, although everything points to a June rate cut by the FED, however, the ECB rate cut for June is a done deal, which is weighing on the Euro.

EUR/USD Chart H1 – The Retrace Seems Complete

EUR/USD declined to 1.0835 ahead of the Federal Reserve’s March meeting, a significant event which expected to heavily influence market sentiment and the direction of the USD. While the Fed is not anticipated to adjust interest rates at this meeting, investors are closely watching for any changes in the accompanying statement and economic projections, which could impact expectations regarding future rate movements.

There is speculation that the Fed may revise its forecasts, particularly regarding the number of rate cuts expected for the year. While policymakers previously projected three 25 basis point rate reductions, some analysts now suggest there is a possibility this could be revised down to two cuts. Such a revision could potentially strengthen the US dollar and push the EUR/USD pair lower. On the other hand, the Eurozone economy continues to remain weak and the ECB has decided for a June rate cut.

Germany March ZEW survey – 19 March 2024

• Germany March ZEW survey current conditions -80.5 points vs -82.0 points expected
• February ZEW survey current conditions were -81.7 points
• Expectations 31.7 points vs 20.5 points expected
• Prior expectations were 19.9 points

The Germany March ZEW survey reflects an improvement in investor confidence, driven by positive developments in economic expectations. Expectations for future economic conditions have improved significantly, surpassing expectations and indicating growing optimism among investors as the European Central Bank continues to confirm the start of rate cuts in June, which is weighing on the Euro.

Similarly, current conditions also saw improvement, albeit to a lesser extent. Despite these positive trends, it’s important to note that the overall economic situation remains the ‘sick man’ of Europe. While the anticipation of the ECB’s first rate cut may have contributed to the improved sentiment, it suggests that there are still challenges and uncertainties ahead for the German economy

Remarks by ECB Policymaker, Pablo Hernandez de Cos

• Risks to inflation outlook are balanced
• We could start cutting rates in June but it is conditional on the data
• But risks to growth projections are clearly to the downside

Market expectations seem to align with de Cos’s remarks, with traders pricing in around a 70% probability of a rate cut in June. This suggests that investors are anticipating further accommodative measures from the ECB in response to evolving economic conditions. However, the ultimate decision will depend on the data and the ECB’s assessment of the economic outlook in the coming months.

EUR/USD Live Chart

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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