empty
08.05.2025 12:47 AM
The Dollar Initiates Talks

Can the Fed Take the Spotlight? Or will the White House's tariff policy continue to overshadow the central bank's actions? The upcoming FOMC meeting and the start of U.S.–China negotiations will shed light on these questions. Recently, markets have been reacting almost exclusively to trade war headlines, which have been mixed and caused EUR/USD to fluctuate within a consolidation range of 1.128–1.138. Only a confident breakout from this range will allow the pair to define its next direction.

In recent days, both the U.S. and China have sent signals of rapprochement, which financial markets interpreted as a de-escalation of tensions. Ultimately, Beijing introduced fiscal stimulus for its economy and headed to Switzerland, where White House representatives await.

Undoubtedly, such draconian tariffs as 145% and 125% cannot last long. HSBC forecasts that tariffs on U.S. imports will eventually be reduced to 50%, while Morgan Stanley expects Washington to take a more gradual approach. The base scenario is a 90-day grace period for China to prepare its counterproposals, similar to the strategy used with other countries.

U.S.–China Tariff Dynamics

This image is no longer relevant

Investors are optimistic that the worst is behind us. The peak of the trade conflict has been reached, and its de-escalation, along with the Fed's decision, may boost U.S. stock indexes and the dollar.

The central bank is expected to keep the federal funds rate at 4.5%, supported by a strong labor market and slowing inflation. Despite Donald Trump's repeated calls to lower the rate, the Fed fully understands that resuming monetary easing too early risks reigniting consumer price growth, especially amid high tariffs.

U.S. Employment and Inflation Trends

This image is no longer relevant

The Fed resembles a goalkeeper during a penalty shootout, shifting between recession and stagflation. It will most likely act preemptively—if labor market weakness begins to show, a rate cut may follow. Still, such a move is more likely in the autumn, allowing EUR/USD bears to hold their ground.

This image is no longer relevant

If positive news emerges from the U.S.–China negotiation table, the EUR/USD pair could enter a corrective phase. However, the euro still has several strong arguments to resist such a bearish outcome. Friedrich Merz successfully became Germany's chancellor, albeit on a second attempt, and European assets appeared more attractive than their American counterparts.

Technically, EUR/USD remains in consolidation on the daily chart. A breakout above the upper boundary of the trading range (1.1280–1.1380) does not guarantee a smooth ride for bulls or a return of the uptrend. A false breakout above 1.1380 or 1.1425 could trigger patterns like Bull Trap and Expanding Wedge, potentially setting the stage for new selling pressure.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Gold Rebounds as Fiscal Risks Resurface

Gold is swinging between extremes as spring draws to a close. The week ending May 16 was the worst for the precious metal due to optimism that, following a trade

Marek Petkovich 17:31 2025-05-23 UTC+2

AUD/JPY. Analysis and Forecast

Today, the AUD/JPY pair has started to attract buying interest, halting its pullback from the monthly high as demand for the Australian dollar emerges. Today's talks between U.S. Deputy Secretary

Irina Yanina 17:25 2025-05-23 UTC+2

USD/CAD. Analysis and Forecast

The pair is trending lower, dropping close to the key psychological level of 1.3800 amid broad-based U.S. dollar weakness. Traders have raised their expectations for Federal Reserve rate cuts following

Irina Yanina 16:43 2025-05-23 UTC+2

USD declares war on EUR

What's new is often just what's been forgotten. As spring draws to a close, the long-dismissed mantra "sell America" is making a comeback in markets. The phrase gained traction following

Marek Petkovich 14:59 2025-05-23 UTC+2

USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed

Irina Manzenko 13:52 2025-05-23 UTC+2

Market Chaos to Continue (There is a likelihood of continued local declines in #USDX and gold prices)

Markets continue to act blindly amid the chaotic actions of Donald Trump, who is trying to pull the U.S. out of a deep, all-encompassing crisis like Baron Munchausen pulling himself

Pati Gani 10:19 2025-05-23 UTC+2

The Market Tucks Its Tail

A necessary project at the wrong time. The House of Representatives has approved Donald Trump's tax cut initiative. The President hopes it will help stimulate the economy and offset shortcomings

Marek Petkovich 09:29 2025-05-23 UTC+2

GBP/USD Overview – May 23: No Talks, but Hang in There

On Thursday, the GBP/USD currency pair traded relatively calmly, but like EUR/USD, it has been rising for two weeks. At first glance, one might wonder what reasons traders have

Paolo Greco 08:15 2025-05-23 UTC+2

EUR/USD Overview – May 23: The Rebellion Against the Dollar Continues

The EUR/USD currency pair traded relatively calmly on Thursday, yet it has risen significantly over the past two weeks. This movement can be interpreted in several ways. From a technical

Paolo Greco 08:15 2025-05-23 UTC+2

What to Pay Attention to on May 23? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Friday. Only two are noteworthy: the final estimate of Germany's Q1 GDP and April's UK retail sales data. The German GDP report

Paolo Greco 05:58 2025-05-23 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.