Euro Dollar Exchange Rate: Forecasts Following Trump’s Victory in the 2024 US Elections

Risks of Dollar Depreciation

Several factors suggest a high risk of dollar depreciation in the near future.
Expectations of Fed rate cuts, the possibility of a Trump victory in the elections, and the bearish setup of the DXY all point towards a likely weakness in the dollar, with significant implications for global markets.

Impact of Fed Rate Cuts

The FedWatch Tool by CME is essential for monitoring the implicit probabilities of future changes in Federal Reserve interest rates.
Currently, the tool indicates an increasing likelihood of rate cuts in the coming months.
When the Fed starts cutting interest rates, the yield on dollar-denominated assets decreases, leading investors to seek opportunities in economies with higher interest rates.
This capital outflow from the US could result in a depreciation of the dollar against other currencies.

Trump Victory and Currency Market

A potential Donald Trump victory in the upcoming US presidential elections could negatively impact the dollar.
Trump has argued that a strong dollar hampers US exports’ competitiveness, particularly in the manufacturing sector.
His economic policies aimed at weakening the dollar could further depreciate the currency and escalate economic tensions globally.

Consequences of a Weaker Dollar on Global Economy

A weaker dollar could enhance the competitiveness of US exports while increasing import costs, potentially fueling domestic inflation.
Foreign investors may find US investments less appealing, leading to reduced capital inflows.
A weaker dollar might also boost prices of dollar-denominated commodities like oil, benefiting buyers with stronger currencies.

Euro and EUR/USD Outlook

The Euro’s outlook against the Dollar is influenced by factors like the ECB’s interest rate policy and political stability in Europe.
The EUR/USD exchange rate reflects macroeconomic and political trends, with recent volatility signaling market uncertainty.
The interplay between the DXY and the Euro index indicates potential future currency movements amidst a backdrop of economic and political challenges.