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Apr 17 - 10:55 AM

SocGen: No Fed Cuts in 2024 Could Push EUR/USD Below 1.05

By eFXdata  —  Apr 17 - 09:30 AM


Société Générale (SocGen) forecasts potential downward pressure on EUR/USD, possibly driving the currency pair below 1.05, following a reassessment of the Federal Reserve's interest rate policy. An unexpected uptick in U.S. inflation has led SocGen’s U.S. economists to revise their outlook, eliminating expectations of Fed rate cuts in 2024. This adjustment contrasts with current market expectations, which still anticipate nearly two rate cuts within the year.

Key Points:

  • Shift in Fed Expectations: Recent data showing a surprise increase in U.S. inflation has prompted a significant shift in SocGen's forecast, with no Fed rate cuts expected for 2024. This contrasts sharply with the broader market's anticipation of rate reductions.

  • Impact on EUR/USD: The shift in policy expectations is likely to lead to a hawkish repricing in U.S. rate markets, putting downward pressure on EUR/USD. The currency pair, which has historically aligned closely with the two-year yield differential between the U.S. and Eurozone, may see further declines due to these revised expectations.

  • Relative Yield Movements: The yield spread between U.S. and Eurozone two-year government bonds has widened, particularly after the recent U.S. inflation data. This widening spread supports a stronger U.S. dollar relative to the euro.

  • Market Pricing and Repricing Risks: Although the market has adjusted to a later start of Fed easing compared to the European Central Bank (ECB), there may still be room for further adjustment. This suggests additional potential for EUR/USD to decline as the market fully digests the implications of sustained U.S. monetary policy tightening.


As SocGen revises its outlook on the Federal Reserve's rate path, significant implications for EUR/USD emerge, with the potential to dip below 1.05. This shift is primarily driven by the unexpected persistence of U.S. inflation and the subsequent adjustment in rate expectations. Investors and traders should closely monitor U.S. economic releases and Fed communications in the coming weeks, as these will be critical in shaping market expectations and currency movement.

Société Générale Research/Market Commentary


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