Deutsche Bank: Markets Pricing Less Than 2 Rate Cuts, Supporting the Dollar

Forex - As the Fed is expected to adopt a more cautious approach to cutting interest rates in 2025, the dollar has risen to its highest level in the last two years against the euro and a basket of currencies. Markets are betting that the policies proposed by President-elect Donald Trump, including trade tariffs and tax cuts, will trigger inflation and limit interest rate cuts. Mohamad Al-Saraf from Danske Bank stated, "With a resilient U.S. economy, markets are now pricing in less than two 25 basis point cuts for the entire year, supporting the dollar." The Fed had signaled in December that it would slow the pace of interest rate cuts. The DXY dollar index rose to 108.835. According to FactSet, the euro dropped to 1.0315 dollars.