If we do not expect rate cuts, it does not mean they will not happen. Nordea comes to this conclusion, explaining that an easing of US monetary policy is not required amid stabilization in the labor market. Another matter is that the fate of EUR/USD may be influenced by the Trump factor. The boss of the White House has repeatedly spoken of his dreams: rates at 1% or lower, as well as a weak dollar. However, achieving these goals would require a great deal of effort.

Even by replacing the Fed chair, Donald Trump is unlikely to achieve his goal. The central bank is not a one-man show; decisions within the FOMC are made collectively. The president needs more of his people, such as Steven Miran, on the Committee. To that end, pressure tactics are being used. The Department of Justice has served Jerome Powell with a lawsuit. A verdict in the Lisa Cook case may be handed down on January 21. If the White House manages to dismiss an FOMC governor, a precedent will be set. The remaining members would feel uneasy.

Dynamics and forecasts for the federal funds rate

Pressure on the Federal Reserve is not a good thing. A loss of independence would result in a reduction in the dollar's share of central banks' foreign exchange reserves, capital outflows, and a decline in the USD index. Especially since inflation would accelerate in the United States and real yields on Treasury bonds would fall.

That said, without all this fuss around the FOMC, the US dollar's position would not have looked as strong as it does now for a long time. In the first half of 2025, the USD index fell due to concerns that Donald Trump's tariffs would be borne by Americans, slowing the US economy. In reality, this did not happen. Massive investments in artificial intelligence technologies and the wealth effect boosted US GDP.

Investors made a second mistake at the end of the year when they bet on a divergence in the monetary policies of the Fed and the ECB and on a narrowing of the economic growth differential between the United States and the eurozone. Neither is happening. The Federal Reserve intends to keep rates unchanged at least until June. This is confirmed by the most hawkish central bank stance since April.

Dynamics of the Fed rhetoric index

Mistakes are meant to be corrected. As a result, in the second half of 2025 the USD index stabilized, and in early 2026 it began to rise. Signs of an acceleration in the eurozone economy are nowhere to be found, while Goldman Sachs forecasts US GDP growth of 2.5% this year. This is significantly higher than Bloomberg experts' consensus forecast of 2%.

Technically, on the daily EUR/USD chart there is a battle between bulls and bears for the pivot level at 1.1615. If sellers manage to hold it, the risks of a continued plunge will increase. In this case, it makes sense to add to previously established short positions in the major currency pair. Target levels for short positions are 1.1500 and 1.1400.