Fears of a recession in the US economy accelerated capital flight from North America to Europe and boosted EURUSD quotes. But may investors have just taken these fears too seriously? Is it all so bad? Let's discuss this topic and make a trading plan.

Major Takeaways

• Donald Trump does not see a recession.
• The US will benefit from the return of manufacturing.
• The US economy is still strong.
• Short trades can be opened if the EURUSD pair falls below 1.089.

Weekly US Dollar Fundamental Forecast

While investors paint a gloomy picture of the US economy due to Donald Trump's tariffs, the media has started to mention "recession" more, and the derivatives market has increased the scope of the Fed's monetary expansion; the actual data suggests otherwise. The labor market remains strong, and inflation is slowing. The soft landing that US dollar bulls have been dreaming of. Has the EURUSD rally gone too far?

n January, US job vacancies rose while layoffs fell, which, combined with a solid increase in employment, points to continued strength in the labor market. Bloomberg expects inflation to slow from 0.5% to 0.3% m/m in February, allowing the Fed to return to the monetary easing cycle. The derivatives market predicts an 80 bps decline in the fed funds rate by the end of 2025, up from 60 bps a week ago.

The fear that has gripped the financial markets is to blame. Donald Trump did not rule out the possibility of a recession, describing the current stage of the US economy as a transitional period. He dismissed the collapse of stock indices, even though he used them as a measure of his performance during his first presidential term. How can one not be frightened?