They learn from mistakes. They make money on mistakes in Forex. In 2025, greenback entered as the favorite. Investors were confident that Donald Trump’s tariffs would slow down economic growth abroad, accelerate American inflation, and force the Fed to keep rates high. The result is a 10% drop in the USD index in the first half of the year. The markets have changed their minds. They began to believe that the duties would slow down US GDP and force the Federal Reserve to cut rates. In fact, the dollar looked good until December.
The main mistake of the second half of the year was ignoring artificial intelligence and the records of the US stock market. The first led to an increase in productivity, the second led to an increase in consumer spending by Americans who became rich on the stock market. This combination accelerated GDP and allowed the “bears” on the EURUSD to resist to the last.
In 2026, the US dollar will enter in a different capacity. The outsider. It is believed that the Fed, led by a White House official, will aggressively cut rates, while the ECB has ended the cycle of monetary expansion. If the American economy is pleasantly surprised, and the influx of capital into the stock markets of the United States does not fade, then these factors will only lead to a temporary strengthening of the greenback.
In fact, there are certain risks that investors will make a mistake for the third time. According to John Williams, President of the Federal Reserve Bank of New York, monetary policy is well positioned. It has gone from moderately rigid to neutral. FOMC forecasts suggest a slowdown in both inflation and unemployment. Officials see only one act of monetary expansion. The futures market is three. Nordea – none at all.
If the Fed stops cutting rates, the US dollar will strengthen. However, this requires strong labor market statistics. Its weakness is already embedded in the EURUSD quotes after Jerome Powell’s statement that actual employment will be on average 60 thousand less than official statistics show.
What else can go wrong? Judging by Kevin Hassett’s comments about the Fed’s independence, he may not be dancing to the tune of the president. Unsurprisingly, Kevin Warsh’s main opponent’s chances have increased significantly recently.
The eurozone economy is showing increased resistance to tariffs, but it may stop doing so in 2026. The ECB will be forced to cut rates. Many factors can change the current market narrative about the continuation of the EURUSD rally.
