Investing.com – The Federal Reserve has begun its rate cutting cycle and Bank of America Securities continues to expect a modest downward trend in the US dollar through 2025.
“While the Fed modestly surprised markets last week with a 50 basis point cut, we see the core dynamics of G10 currencies largely unchanged and continuing to rise,” Bank of America Securities analysts said in a Sept. 26 note.
The bank views the US dollar as moderately overvalued, but the Fed’s rate cut cycle could likely further weaken this overvaluation over the medium term, including our outlook for a rising EUR/USD.
“We expect the EUR/USD to build on recent gains, with our forecast profile unchanged at 1.12 at end-2024 and 1.17 at end-2025,” BoA said.
The USD’s decline is likely to continue, the bank said, as disinflationary trends and a weakening labor market support the Fed’s slightly faster pace of rate cuts.
The BoA expects another 50 basis point cut at the November meeting and a 25 basis point cut in December.
At 10:00 ET (14:00 GMT), EUR/USD was trading 0.1% higher at 1.1142, up about 1% since the start of the year.
