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EUR/USD: Longs The 2nd-Best G-10 FX Trade In 3 Months Ahead Of Fed Rate Cut

Nordea Research discusses EUR/USD outlook and notes that historically, a long EUR/USD position is the second-best G-10 FX trade in the three months leading up to the first Fed cut, only outpaced by a long EUR/NZD position.

“EUR/USD has picked up during the 60 trading days preceding the first rate cut from the Fed in five out of the last six rate cutting cycles – with the 1989 cycle as the sole exception – on average by roughly 3%,” Nordea notes. 

“The reason why EUR/USD picks up is probably that the ECB is seen as the “easing turtle” among the G10 central banks, which is why the rate spread is at least temporarily supportive of a rising EUR/USD cross around the beginning of a new Fed cutting cycle. But EUR/USD often moves lower again 6-12 months into the cutting cycle, probably as the ECB tends to follow the Fed with a time lag,” Nordea adds.