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The Gist
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Global Philippines Fine Living
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INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
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2024 Mid-Year Economi Briefing, economic growth in the Philippines
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June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
Downloads
Buildings in the Makati Central Business District
Economic Updates
Monthly Recap: BSP to outpace the Fed in rate cuts 
May 29, 2025 DOWNLOAD
economy-ss-9
Economic Updates
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May 8, 2025 DOWNLOAD
investment-ss-3
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Policy rate views: Uncertainty stalls cuts
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Currencies 2 MIN READ

Fed, ECB divergence should limit EUR/USD pull backs

January 23, 2023By Reuters
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Jan 23 (Reuters) – EUR/USD struck a 9-month high on Monday before reversing lower with help from rising US rates and a buoyant dollar, but pull backs such as these are likely to be opportunities for bulls, supported by diverging Fed and ECB policy paths.

CFTC data indicate investors expect short-term US rates to decrease nL8N3470HM, which would lead to a steepening of the US 3-month/10-year spread.

Eurodollar and fed funds futures continue to price in Fed rate cuts in either Q3 or Q4 2023.

A Reuters poll indicates economists expect the ECB to hike 50bps at its next two meetings with hikes ending when the deposit rate reaches 3.25% in Q2 2023.

Euribor futures mirror the poll results but then price rate cuts in either Q3 2023 or Q1 2024.

Eurodollar and Euribor investors are pricing in much more aggressive rate cuts for the Fed than the ECB, which should help erode the dollar’s yield advantage over the euro and underpin EUR/USD.

Bullish technicals reinforce the rate influences and as long as current investor sentiment regarding central bank policies holds EUR/USD could rally.

(Christopher Romano is a Reuters market analyst. The views expressed are his own.)

 

This article originally appeared on reuters.com

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