Investing.com – The Federal Reserve has begun its rate-cutting cycle, and Bank of America Securities continues to expect a modest decline in the US dollar through 2025.
“Although the Fed modestly surprised markets with a 50 basis point cut last week, we see major currency dynamics largely unchanged in the G10,” analysts at Bank of America Securities said in a September 26 note. As the drift continues to the upside.”
The bank views the US dollar as somewhat overvalued, but a Fed rate cutting cycle is likely to help mitigate this overvaluation in the medium term, including our expectations for a higher EUR/USD pair.
“We look for EUR/USD to build on recent gains, with our unrevised forecast for end-2024 at 1.12 and end-2025 at 1.17,” Bank of America said.
The dollar’s downward trend is likely to continue, the bank said, as deflationary trends and a weak labor market support the Fed in a more accelerated pace of interest rate cuts.
The Bank of England expects another 50 basis point cut at its November meeting and a 25 basis point cut in December.
At 10:00 EST (14:00 GMT), EUR/USD was trading 0.1% higher at 1.1142, up about 1% year-to-date.
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