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Daily Market View 04-12-2025

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2:05

Euro Leads the Way as Dollar Decline Continues

1 Minute Market Rundown

Higher bets that National Economic Council Director Kevin Hassett will take over from Powell in May triggers further weakening in USD.
Euro best placed to rally based off options positioning as Calls in Euro's favour post strong incline.

EUR

Despite inflation just falling short of expectations on Tuesday and a relatively uninspired raft of PMI data yesterday, the Euro's stride cannot be broken, so it seems. Trump's cancelling of scheduled interviews for the Fed Chairman position on Tuesday suggested that he had found his man.

A meeting with cabinet in which front runner and Trump ally Kevin Hassett was present was topped with the President stating "the run is down to one" and "he may be sat in this room". How dramatic.

Screenshot 2025-12-03 163932

Hassett would likely position himself more dovish than Powell, especially in the early days of his tenure as he seeks to maintain Whitehouse support. A front row seat to what a bickering Whitehouse and Fed can look like will have likely informed him to keep in line with the President.

This nod by the President suggests a lower Federal Reserve base rate by the end of next year and so a weaker Dollar. The market expected just 2 cuts from the Fed next year on Monday, with now a full 3 (excl. the coming cut this month) being priced in and a 4th seen as a toss up.

This suggests another good year for the Euro next year, with the ECB (mostly) expected to keep rates steady at 2% next year, whilst the Fed approaches 3% or 2.75%, cutting USD's rate differential down by at least half. EURUSD is already ripping away and if events proceed as expected next year, it could be the rally that carries EUR over its key technicals.

Markets Today

*Please be aware the below rates represent the market rate at 8:00 AM, contact your Caxton dealer or check online for a live quote.

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