At the beginning of September this year, there were repeated forecasts about the dramatic crash of the USD and the US economy in 2024. However, as the following year approaches, experts’ words sound less confident. Why is it happening? Let’s explore the reasons for experts adjusting the EURUSD perspectives for the following year.
The euro, same as other major currencies, strengthened against the US dollar in November. The EURUSD even reached the 1.10 mark for the first time since the summer. It seemed that expectations about the Fed’s policy in 2024 could sustain the trend seen in November. However, that wasn’t the case. On the contrary, the USD stabilized the rate a bit.
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Anyway, let’s return to the Forex market and changes in the EURUSD pair in 2023. You can see that the euro’s growth since the beginning of the year doesn’t impress for some reason.
Besides, the euro had its moment of glory this year. For notice, the European currency was on the rise at the end of the summer, with expectations that the European Central Bank would continue to push the interest rate. However, it turned out that the hawkish cycle was much shorter, and the US economy appeared to be more stable (also, consider the record figures of US bond yields).
Finally, the Fed’s officials ceased hesitating to say there would be no more interest rate hikes. This fact led to the USD’s decline in November. Since then, not much has changed, so why isn’t the US dollar decreasing in December?
The anticipated weakness of the USD was based on expectations that there would be a large time gap between the start of the decreasing cycle by the Fed and other major central banks (with a focus on the ECB). However, it’s no longer so evident. While the Federal Reserve is likely to decrease the interest rate in the first half of 2024 (or even in the first quarter), the European Central Bank might do the same a few months after its American counterpart.
The abovementioned is the main reason why many experts disagree in their forecasts. Some believe the Fed will initiate its cycle much earlier than the ECB, while others are sure that the difference will not be so critical. Plus, the US economy appears to be in better shape than anticipated. These disagreements contribute to the varied expectations for the EURUSD rate by the end of 2024, ranging from 1.05 to 1.20.
That’s why conducting your own analysis and closely monitoring economic events is crucial if you want to profit from Forex and other markets.
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