EUR/USD, USD/CHF flows: Fed Rate Cuts More Important

EUR/USD has been stable in early European trading, but the tone remains USD negative. The low core U.S. November PCE inflation has cemented Fed rate cut hopes, with a 93% probability of a 25bps cut at the March 20 FOMC meeting.  Though the money markets are discounting the same amount of Fed and ECB easing, the FX market feels more confident about Fed cuts.  Additionally, a Fed easing cycle is seen to be USD negative, both as it reduces the carry appeal of the USD and as the USD is overvalued.  We see 1.15 by end 2024 on EUR/USD.  However, some further end of year USD selling could be seen, before consolidation ahead of the December U.S. employment report on December 6.