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2025-09-15 21:51:46
[A Critical Moment for the Fed to Set the Tone: Euro Bulls Gamble on Powell] ⑴ Market analysts believe that the short-term direction of the euro against the dollar will be highly dependent on signals from the upcoming Fed policy meeting. ⑵ Recent data shows that net long euro positions have climbed to their highest level since early July, indicating that investors are optimistic about the euro's outlook and are pinning their hopes on a dovish Fed policy shift. ⑶ However, this optimism may face a test. If the Fed's stance is less dovish than market expectations, it could lead to a rebound in US Treasury yields, weakening the euro's relative appeal and putting downward pressure on the euro against the dollar. ⑷ At that time, the market may need to reprice its expectations for a Fed rate cut, which would widen the interest rate differential, highlighting the dollar's yield advantage and posing a challenge to the euro. ⑸ Furthermore, if Fed Chairman Powell fails to convey sufficiently dovish signals at his press conference, previously accumulated euro long positions may face profit-taking pressure, exacerbating short-term selling momentum. ⑹ On the contrary, if the Fed sends a more dovish signal than expected, it may trigger a significant decline in US Treasury yields and the US dollar, thereby opening up a broader upside space for the euro against the US dollar and possibly pushing it back above the 1.20 mark.
