EUR/USD Could Head Higher - Wait for Bullish Confirmation Before Going Long
The EUR/USD’s sluggish start to the year continued in the first half of Wednesday’s session, with investors showing a preference for the US dollar ahead of key data releases from the world’s largest economy.
The EUR/USD has also been hurt by a poor start to the year for equities, with major indexes extending their losses for the second day.
Expectations for a dovish shift by the Federal Reserve boosted risk assets at the end of 2023. However, this momentum has slowed in early 2024. Investors doubt if rate cuts will match market expectations.
The market anticipates up to 160 basis points in cuts this year, double the Fed's projection. Some investors feel that the market may be overestimating the rate cuts and are thus reversing their trades or taking profit on long-risk positions.
Investors will watch economic data for clues and will be reassessing the likelihood of significant cuts. Today’s releases of the FOMC’s December meeting minutes will provide insight into the central bank's stance.
The FOMC minutes might reveal more about the Fed's 2024 rate cut strategy. The rates market indicates a 75% chance of a March cut. Last year, expectations of 2024 rate cuts weakened the US dollar, but the minutes may not confirm the hoped-for dovish signals.
Though the Fed hinted at 2024 rate cuts, Chair Powell provided few details on timing and scale. The market might have prematurely anticipated next year's cuts. Disappointing minutes could boost USD, further weighing on the EUR/USD in the short-term
The ADP private payrolls report and weekly jobless claims on Thursday will shed some more light on the labor market, ahead of the official nonfarm payrolls report on Friday.
As it is all about when the Fed will start cutting rates in
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