EUR/USD: Euro Steady at $1.09 as Dollar Bulls Retreat Amid Bright Rate Cut Outlook

Forex markets are undergoing a rotation out of US dollar and into alternative currencies as Fed expresses optimism over rate cuts.

• The EURUSD pair advanced in the early hours on Wednesday, looking stable at the $1.09 mark. The euro has been making steady progress over the past month with consistent gains in 13 out of the last 15 trading days. Over that time span, the old continent’s currency has added over 230 pips, or 2.1%, to its valuation against a weakening dollar. A shift in market expectations is underway.
• Forex bros are rotating out of the greenback and into alternative currencies, such as the euro and the sterling. Bargain hunters are finding little incentive to hold the US dollar now that the Federal Reserve has signaled it is looking to slash interest rates before lowering inflation reaches the central bank’s 2% target. In other words, the opportunity cost of holding the dollar increases and this prompts traders to seek alpha returns elsewhere.
• In this context, other major currencies were higher against the buck. The British sterling is trading at a one-year high with the GBP/USD pair floating right under $1.30. The USD/JPY remained under pressure earlier today with the Japanese yen gravitating toward ¥158.30 to the dollar. Japan’s currency rallied against the dollar last week, with the dollar-yen crashing more than 2.7% on a possible intervention from Japan authorities.