Increased Pressure on the U.S. Federal Reserve
Many central banks are in the spotlight this week. But the one that will truly capture attention is the Fed. In light of recent employment figures, a rate cut of -25 basis points is a given. This will certainly be too little for the White House, which is likely to express its discontent soon after. The foreign exchange market is now accustomed. No particular stir is expected on the dollar, according to us.
The macro point
No surprises in Europe. The European Central Bank (ECB) kept its key interest rate unchanged at 2% during its meeting last Thursday. They announced it. They did it. The rates are currently at an ideal level considering the economic situation and forecasts for the coming months. If necessary, the central bank can lower the cost of borrowing even more at any time. But everything suggests that we have reached the end of the easing cycle. The institution also took care not to overly comment on the French political situation. The rise in France's borrowing costs continues. However, we are far from crisis levels. Especially, during the last Treasury auctions, demand was as strong as ever, indicating that foreign investors trust our country. They just demand a slightly higher premium due to the budget slippage and political uncertainty. Nothing abnormal. From our perspective, the French problem is not so much financial at the moment. It is mainly an economic issue. The censure of the Baroin government had prompted business leaders to be cautious – many postponing hires and investments deemed non-essential. The same thing could happen. Our growth is therefore likely to be very low – far from the government's target of 0.7% and the 2024 level of 1.1%. Additionally, the trade war is rebounding – without having a notable effect on currencies. During a strategic meeting between the EU and the USA in Washington mid-last week, President Donald Trump proposed that the Union impose customs tariffs of up to 100% on Chinese and Indian imports to pressure Russia. In case of retaliations, the level of taxes would be doubled – a usual pattern with the Trump administration. The goal is to persuade these two countries to stop trading and importing Russian oil. There is little chance the proposal will succeed, mainly because it targets China – which the Europeans currently refuse due to their strong dependence on this market. The Indian rupee is the only currency that reacted a little afterward. It has been weakened since the beginning of August by massive customs tariffs imposed by the Americans on Indians following 'Liberation Day'. As a result, the rupee is the worst-performing Asian currency since January. It has fallen 16% against the euro and 3% against the US dollar. This is certainly just the beginning. Another loser this year: the Turkish lira. It continues to collapse with a 95% loss in value against the dollar since 2010. It symbolizes the economic and financial collapse of Turkey. The fact that the central bank is not independent and that the government pushes it to take completely inappropriate measures – lowering key rates in a context of hyperinflation – has durably broken the bond of trust with foreign investors. Why doesn't the country collapse? The banking and financial sector is isolated, preventing capital flight, and at regular intervals, massive liquidity injections occur in the economy to prevent a crisis. Nevertheless, the country is impoverishing at great speed.
Technical point
In the foreign exchange market, major trends remain unchanged. The EUR/USD is still in a bullish channel. It could reach 1.20 by the end of the year. Economists' consensus predicts a push to 1.30 next year. Be careful, this is far from certain. We know consensus is often wrong. It is not guaranteed that the US dollar's downward trend will continue in 2026. Despite profit-taking in recent sessions, the EUR/GBP continues its upward trend, with the possibility of reaching the target at 0.87. Finally, an upward trend for the EUR/JPY. The pair is up +6% since the beginning of the year. It is not over. As long as the Bank of Japan does not change its rates, the increase will continue.
The supports and resistances displayed below indicate the low and high points within which the prices should evolve during the week. | Weekly Supports | | Weekly Resistances | |
|---|
| S2 | S1 | R1 | R2 |
| EUR/USD | 1.1489 | 1.1590 | 1.1813 | 1.1890 |
| EUR/GBP | 0.8510 | 0.8588 | 0.8700 | 0.8733 |
| EUR/CHF | 0.9222 | 0.9250 | 0.9400 | 0.9415 |
| EUR/CAD | 1.5888 | 1.6098 | 1.6325 | 1.6390 |
| EUR/JPY | 168.99 | 170.88 | 172.99 | 173.45 |
Announcements to follow
This week, central banks are in the spotlight. In the UK, Japan, and Canada, no change in monetary policy is expected. In Japan, a new rate hike, which has been announced for several months, might only occur next year. The US Federal Reserve (Fed), however, will be the focus of attention. Due to the significant slowdown in the job market, and despite persistent inflationary pressures, it is likely that it will lower its benchmark rate by -25 basis points to 4.25% from 4.50% currently. A further cut in October is still uncertain — everything will depend on upcoming inflation figures. Expect the Trump administration to express its discontent following the Fed's decision. The US president and the Treasury Secretary have pleaded in recent days for a rate cut of at least -50 basis points. Little impact is expected on the foreign exchange market. Operators are now accustomed to the White House's mood swings and attacks on Fed President J. Powell.
Below you will find publications and events that should have a major impact on currency rate developments.
| Day | Time | Country | Indicator | What to expect? |
|---|
| 09/17/2025 | 11:00 | Eurozone | Inflation (August) | Previous at 2.1% year-on-year. |
| 09/17/2025 | 15:45 | Canada | Central bank meeting | No new rate cut expected. |
| 09/17/2025 | 20:00 | USD | Central bank meeting | Rate cut of -25 basis points (currently at 4.50%) |
| 09/18/2025 | 13:00 | UK | Central bank meeting | No change in monetary policy |
| 09/19/2025 | 05:00 | Japan | Central bank meeting | No change in monetary policy |
The information presented in this publication is communicated to you purely for informational purposes and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should in no case serve as a basis or be considered an incitement to engage in any investment.