At Any Rate Global FX and Economics: A look back to monetary policy and a look ahead to fiscal
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Jun 20, 2025 In this discussion, Greg Fuzesi, Chief Euro-Rider Economist at J.P. Morgan, sheds light on the implications of Germany's upcoming budget and the NATO summit for foreign exchange markets. The panel analyzes recent central bank meetings, focusing on how geopolitical risks and strong U.S. data are impacting dollar sentiment. They delve into the fiscal challenges Germany faces, the influence of foreign investment trends, and the shifting dynamics of currency valuations, all while evaluating the dollar's potential downtrend post-FOMC meeting.
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Complexities of German Budget Forecasts
- Germany's 2025 federal deficit forecast likely needs to reach around 100 billion euros for consistency with expectations.
- Investors must interpret partial budget releases carefully, given complexities and timing delays.
NATO Defense Spending Targets
- Achieving NATO defense spending targets between 3.5% and 5% will be a gradual process over many years.
- Germany faces a unique fiscal challenge due to defense and infrastructure upgrades compared to other nations.
BOJ's Quiet Tightening Strategy
- BOJ's announced QT will likely accelerate balance sheet shrinkage despite unchanged policy rates.
- This potentially positions the BOJ on a more aggressive monetary nominalization path than ECB or Fed.