Investing.com -- The euro has suffered a bruising encounter against the dollar this year, but could see some short-term respite if the post-December Federal Reserve meeting weakness in the dollar strikes again.
"Since 1999, the DXY index's return for rest of the year after December FOMC had been negative 64% of the time," analysts at a Bank of America (NYSE:BAC) said in a recent note.
This seasonal weakness in the dollar could provide some relief for the euro, which has been under pressure against the greenback for much of the year.
Any potential respite, however, could prove be short-lived as "January seasonality tends to be more bullish for the USD, with the DXY index higher 60% of the time," the analysts said.
Looking ahead to 2025, the bank outlined two potential scenarios for the EUR/USD pair:
In a baseline scenario where the dollar consolidates after the FOMC meeting, the analysts suggest that "USD bulls could consider OTM EURUSD digi puts at start of Jan '25 with better price levels."
But if the FOMC's Summary of Economic Projections -- set to be released alongside the Fed's rate decision on Dec. 18 -- is more hawkish than current market expectations for 2025 rate cuts, the dollar could end the year stronger. In this case, "EURUSD put spreads would be preferred," the analysts said.