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Societe Generale's Kit Juckes highlights that the EUR/USD pair previously outperformed rate differentials during the Trump administration due to weaker dollar expectations, but now underperforms as the US economy gains momentum and the Eurozone lags. Current dynamics show the USD retaining safe-haven demand amid divergent monetary policies between the Fed and ECB. The analyst suggests the pair may retest 1.20 levels as US economic data and rate differentials drive the USD higher.
For traders, this analysis underscores the importance of monitoring US economic strength versus Eurozone stagnation. The USD's safe-haven status and Fed's hawkish stance contrast with the ECB's dovish approach, creating a structural bias for the dollar. Positioning adjustments may be needed as rate differentials widen and geopolitical risks persist.
Looking ahead, investors should watch Fed rate decisions, Eurozone inflation data, and US employment reports. The 1.20 level could act as a key support/resistance zone, with a break above it signaling renewed bullish momentum for the EUR/USD. Central bank policy divergence will remain a critical driver in the near term.
