EURUSD:
The EUR/USD exchange rate is showing signs of recovery, trading near 1.0280 in Asian hours. However, the pair’s gains may remain constrained as the US Dollar (USD) is poised to strengthen due to market caution ahead of President-elect Donald Trump’s inauguration later in the day.Please note that the US market will be closed on Monday for the Martin Luther King Jr. Day holiday.
Concerns over Trump’s policy promises, including the imposition of tariffs, the extension of tax cuts and the deportation of illegal immigrants, have caused US Treasury bond yields to rise and supported the dollar ahead of his inauguration.Analysts believe that the future trajectory of US Federal Reserve (Fed) interest rates will depend on the extent to which the Trump administration implements these measures.Investors will be closely monitoring Trump’s planned executive orders, which are expected to be released shortly after he takes office. Meanwhile, the Fed is expected to keep interest rates unchanged at its January meeting, with most economists polled by Reuters predicting a resumption of rate hikes in March.The Euro (EUR) faces headwinds amid continued dovish expectations for the European Central Bank (ECB). Market forecasts indicate a 25 basis points (bps) interest rate reduction at each of the ECB’s subsequent four meetings, reflecting concerns regarding the Eurozone’s economic outlook and expectations that inflationary pressures remain under control.Minutes from the ECB’s December meeting, released last week, suggest that policymakers placed greater emphasis on the pace of policy easing this year rather than on pausing or ending the rate-cutting cycle. Officials in particular discussed the possibility of a 50 basis point (bps) rate cut to guard against downside risks to growth, which have been exacerbated by both global and domestic political uncertainty.
Trading recommendation: We follow the level of 1.0300, if it is fixed above we consider Buy positions, if it bounces back we consider Sell positions.
