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EURUSD:
The EUR/USD exchange rate experienced a positive shift on Thursday, rising four-tenths of a percentage point and breaking a six-day losing streak that saw it lose 2 per cent from peak to peak. Tariff concerns remain a top priority for investors, but there was a brief respite on Thursday as US President Donald Trump shifted his focus to other matters, at least temporarily.
US GDP for Q4 2024 rose 2.4 per cent, surpassing the anticipated 2.3 per cent. However, Moody’s has expressed concerns that tariff hikes and tax cuts could lead to a significant increase in government deficits and a potential downgrade in US debt ratings, resulting in higher Treasury yields.
S&P Global has expressed concerns that US policy uncertainty could potentially hinder global growth, while Fitch Ratings has highlighted the potential impact of current tariffs on smaller economies such as Brazil, India and Vietnam, given the challenges they may face in purchasing US goods. The CBO has revised its 2025 GDP forecast to 1.9 per cent, anticipating this growth rate to persist through 2035 and inflation to decelerate to near zero by 2025. They also forecast that the fiscal deficit will rise to 7.3 per cent of GDP in 2025 without policy adjustment, while interest payments could absorb 5.4 per cent of GDP by 2055.
The release of key US data this week, including the Personal Consumption Expenditure (PCE) price index, scheduled for Friday, will provide further insights into the economic outlook. Investors are hopeful that the recent rise in inflation will be short-lived, with median forecasts predicting a PCE inflation rate of 2.7% year-on-year in February.
Trading recommendation: SELL 1.0780, SL 1.0850, TP 1.0695
Origin: FreshForex
