Many of the readers pay particular attention to the EUR/USD exchange rate. The fact that it rose so sharply yesterday and this morning could easily be interpreted as an effect of yesterday's ECB decision. But that would be a mistake, Commerzbank’s FX Head of FX and Commodity Research Ulrich Leuchtmann notes.
USD short positions are likely to appear more attractive
“The EUR/USD movement since the evening before yesterday was exclusively USD weakness. EUR didn't move at all. I think the reason for the Greenback weakness is obvious: it is clear to everyone that a 50-basis-point move by the Fed next Wednesday is a serious possibility. Some market participants may have long perceived a 50 basis point move as an unlikely possibility.”
“Because the labor market is still not in as dramatic a situation as it usually is when the Fed makes major interest rate moves, because interest rate hikes are tricky during a presidential election campaign anyway, and a big one even more so, because the Fed is unlikely to share the market's extremely low inflation expectations, which are probably driven more by fears of recession than by cool economic analysis.”
“For the currency market, there is another argument: those who are bullish on the USD because they expect the Fed to cut interest rates slowly in the medium term would be instantly refuted by a 50 basis point move on Wednesday. But those who are USD-bearish because they expect a rapid pace of interest rate cuts in the medium term would not have to capitulate if there are only 25 basis points on Wednesday. The risks of USD positions next week are likely to be asymmetrical. For risk-averse investors who are undecided between 25 and 50 basis points, USD short positions are likely to appear more attractive than USD long positions. This is already weakening the USD.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Trading Pro
Account
7.2
8.2
7.2
Tools
5.2
Service
6.6
Trading
8.0
Trust
5.0
Experience
7.0
Recommended content
Recommended content
Editors’ Picks
EUR/USD turns negative near 1.1000, Dollar trims losses
The now mild bounce in the US Dollar puts EUR/USD under pressure and drags it back to the proximity of the 1.1000 support as investors continue to assess the stronger-than-expected NFP figures in March (+228K).
GBP/USD stays offered around 1.3000 on USD-buying
The now generalised selling pressure hurting the risk complex sends GBP/USD back to the 1.3000 neighbourhood amid heavy losses and the marked rebound in the Greenback, particulalry following solid prints from the US labour market report.
Gold remains on the back foot around $3,000 after US Payrolls
In the wake of March’s US labour market report, Gold prices maintain their offered tone around the critical $3,000 mark per troy ounce amid marginal gains in the Greenback and further weakness in US yields.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.