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

XAU/USD. Analysis and Forecast

Today, gold is rising, trading near the all-time high reached the previous day, amid growing uncertainty surrounding the US-China trade wars. Gold is gaining ground today, remaining close

Irina Yanina 12:18 2025-04-15 UTC+2

USD/JPY. Analysis and Forecast

Today, the Japanese yen is struggling to extend its gains due to optimistic developments regarding trade negotiations and the postponement of tariffs. President Trump's statement about possible exemptions

Irina Yanina 12:08 2025-04-15 UTC+2

Trump Will Either Win or Lose. Is There No Middle Ground? (Potential Renewed Decline in #SPX and Bitcoin)

On Monday, markets calmed slightly amid Donald Trump's apparent backpedaling on the trade barriers he had imposed on America's trading partners. It gives the impression that the U.S. president

Pati Gani 09:46 2025-04-15 UTC+2

The Market Celebrates a Ceasefire

While there is still no peace in the trade conflict, a semblance of a ceasefire has appeared. The White House is beginning to frantically realize it has gone

Marek Petkovich 09:08 2025-04-15 UTC+2

What to Pay Attention to on April 15? A Breakdown of Fundamental Events for Beginners

Quite a few macroeconomic events are scheduled for Tuesday, but under the current circumstances, macroeconomic data mean little to the market. They might have a short-term local impact

Paolo Greco 06:29 2025-04-15 UTC+2

GBP/USD Overview. April 15: Trump Giveth, Trump Taketh Away

The GBP/USD currency pair continued its upward movement on Monday. As with the euro, there was no specific reason for the pair to decline. Of course, the current rally looks

Paolo Greco 03:57 2025-04-15 UTC+2

EUR/USD Overview. April 15: Who Found a Reason for Optimism?

The EUR/USD currency pair continued its upward movement on Monday. Despite the slower growth this time, the pair continues to rise. Yesterday saw a 50-pip increase; today, it's 250. What

Paolo Greco 03:57 2025-04-15 UTC+2

ECB Meeting: What to Expect?

This week, the ECB's meeting in April is happening, and the euro is in high spirits. The euro has been doing exceptionally well for at least two months—seemingly without much

Chin Zhao 00:35 2025-04-15 UTC+2

The Pound Forms a Top

The British economy grew by 0.5% in February, rebounding from no growth in January and significantly exceeding the forecast of +0.1%. This was the strongest growth in the last

Kuvat Raharjo 00:35 2025-04-15 UTC+2

EUR/USD: Northern Trend, Southern Pullbacks

The upward trend in the EUR/USD pair remains intact amid the overall weakness of the U.S. dollar. Significant downward pullbacks allow buyers to open long positions at more favorable prices

Irina Manzenko 00:35 2025-04-15 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.