Société Générale (SocGen) analyzes the potential impact of the upcoming January Federal Open Market Committee (FOMC) meeting on the EUR, amid a week filled with several central bank meetings.
Central Bank Meetings:
- Many central banks, including G10 ones, are set to meet this week, with the majority expected to keep rates unchanged.
- Key attention is on the FOMC, Riksbank, and Bank of England, all likely to hold rates steady.
FOMC's Position and Data Trends:
- The FOMC's December statement highlighted slowing growth and declining but still high inflation.
- Since then, US economic data have generally outperformed expectations, while inflation data have leaned towards lower surprises.
Impact on the Euro:
- Recent shifts in the relative pricing of ECB and Fed policies have moved against the Euro, making it more vulnerable.
- Changes in 2024 GDP growth forecasts further threaten the Euro.
- While recent data have already factored in considerable negativity, this may not be sufficient to prevent a potential decline in EUR/USD, unless risk sentiment remains robust.
SocGen anticipates that the January FOMC meeting, along with other central bank meetings this week, are unlikely to provide substantial support to the Euro. With the focus on the Fed's adjustments from its December messaging, the Euro faces vulnerability due to shifting policy dynamics and growth forecasts.