This is why the euro can defend its recent gains against the dollar and the franc | 20.09.24

The first interest rate cut by the US Federal Reserve on Wednesday evening tended to weaken the greenback and thus gave the euro some momentum.

The euro/franc pair is more or less treading water this morning at 0.9453. Before the Fed's significant interest rate cut, it was still trading well below 94 cents. The dollar/franc pair has also been treading water since the previous evening at 0.8470.

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Meanwhile, the European common currency, the euro, is defending its recent gains against the US dollar. With the Fed's interest rate cut, the US yield advantage over the eurozone has initially shrunk further. This gave the euro a strong boost, especially yesterday (Thursday), and weakened the greenback. The pair is currently trading at 1.1162.

“Following the surprisingly significant interest rate cut in the USA, some calm should return to the financial markets,” says a commentary by Helaba. The British and Japanese central banks also contributed to this by leaving their monetary policy unchanged in line with expectations.

In terms of the interest rate cut fantasy, not much has happened in the end. “On the one hand, expectations were already well advanced and ambitious, particularly for US monetary policy, and on the other hand, the most recently published US data do not suggest a sustained slowdown in economic momentum,” the commentary continues. The data calendar also offers little impetus at the end of the week.

awp-robots/HR/TV

Zurich (awp)