Forecast for next week for the euro dollar exchange rate – Photo from pixabay.com
While stock markets seem to have reached a point of stasis, the situation seems clearer when it comes to currencies. In fact, as we will read in the next paragraphs, the forecasts for next week for the euro-dollar exchange rate not only for the short term, but also for the long term, would seem to be in favor of the American currency.
The FED’s move from a comment by Ebury
The Federal Reserve sent an aggressive signal to the market, allowing the dollar to recover some of the losses suffered after the data on the consumer price index. As expected, the FOMC meeting resulted in no changes in monetary policy, keeping the Fed Funds rate stable between 5.25% and 5.50%. President Powell welcomed the inflation data, which in May saw core inflation fall to 3.4%, a three-year low.
FOMC members expect cuts in 2024, but Powell stressed the need for greater confidence in inflation before easing monetary policy. Changes to the FOMC statement were modest, with an improvement in inflation acknowledged but with projections raised marginally: PCE inflation forecast at 2.6% and core PCE at 2.8% by the end of 2024. Economic activity is defined as “solid” and real GDP growth forecasts are unchanged.
The updated dot plot showed an upward revision for 2024, suggesting just one rate cut this year compared to the three expected in March. This surprised the markets, which were expecting two cuts. Of the seventeen voting members, eight see two rate cuts, seven see only one and four see none. Powell said most members did not change their rate projections after the CPI data.
The June dot plot therefore indicates a split among Fed officials over whether to choose one or two rate cuts in 2024. Markets continue to expect two cuts, with 45 basis points of reduction by the end of this year.
Forecast for next week for the euro dollar exchange rate
The exchange rate in recent days has moved in the 1.07 area. Since the beginning of the year, they have marked the minimum at 1.061 and the maximum at 1.1054. The Alligator Indicator on the daily and weekly time frames is set to bearish/sideways, while our oscillators are flattened with conflicting signals between them. This suggests that we could see a lateral phase in prices in the short term. The holding of the 1.0916 area in the next few days (high of the week of 3 June) could lead prices towards 1.061 (low of the week of 15 April). Below this level we could witness a bearish acceleration with the objective within a few months in the 1.02 area. A trend line passes through this area starting from the lows of recent months.
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