The dollar reaches its highest level against the euro since 2023. The Fed's rate reduction prospects remain uncertain, while the ECB could adopt a more accommodating stance.
The dollar broke a new high, reaching its highest level against the euro in more than a year. Yesterday evening, the greenback appreciated by 0.60% against the euro, trading at 1.0479 dollars for one euro, after reaching 1.0462 dollars, a level not reached since October 2023.
This progression of the dollar is driven by contradictory monetary policies. Indeed, the American Federal Reserve (Fed) adopts a position perceived as firmer, while the European Central Bank (ECB) is considered more accommodating.
Fed rate cut remains uncertain
The Fed may be reluctant to cut rates in December due to rising inflation and the strength of the U.S. economy. Michelle Bowman, Governor of the Fed, also indicated that progress against inflation seemed to be stagnating in recent months.
Economists now estimate a 56% chance of a 0.25 point cut at the Fed's Dec. 17-18 meeting, up from 72% last week.
Currently, US rates are between 4.50% and 4.75%. In the long term, the market expects three rate cuts by the end of 2025, compared to six expected two months ago.
At the same time, the ECB could adopt a more aggressive policy, with rate cuts expected from December. Economists estimate that the ECB's reference rate could reach 2% by mid-2025, supporting the dollar's position.
Jihen Mkehli
Published on 11/22/24 1:44 p.m.
