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2024/05/02 / Erste Group Research

FX markets reflect uncertain interest rate outlook

The EURUSD has been moving in a range since the beginning of 2023. Interest rate expectations have changed constantly during this time, but neither of the two economic areas has been able to gain a lasting advantage. This is likely to have been the reason for the relatively muted reaction on the markets to the recent shift in interest rate expectations in favor of the US.

Despite the recent minor interest rate hike by the Bank of Japan, the yen came under considerable selling pressure at the end of April. The recent sharp drop in expectations for interest rate cuts in the US for 2024 plays a role in this context, as the interest rate level in Japan is significantly lower than those of the US and the Eurozone, despite the small rate hike.

The SNB already lowered its key interest rate by 25 basis points to 1.5% in March, causing the Swiss franc to weaken to a level of 0.98 against the euro. This clearly shows the impact that interest rate changes and changes in interest rate expectations in both currency areas have on exchange rate developments.

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General information

AuthorErste Group Research
Product nameForex News
Topic in focusFX, Macro/ Fixed income
Economy in focusEurozone, Japan, Switzerland, United States
Currency in focusEuro, Swiss Franc, US Dollar
Sector in focus-