EURUSD is consolidating in a tight range near 1.0500, as investors await the Fed’s policy meeting.
In the European session on Wednesday, the EURUSD trades in a tight range at the psychological level of 1.0500.
The Fed widely expected to decrease interest rates by 25 basis points while maintaining modestly hawkish policy direction.
The major currency pair consolidates as investors await the outcome of the Federal Reserve’s (Fed) final policy meeting of the year, which will end at 19:00 GMT. The Federal Reserve will also release a revised Summary of Economic Projections (SEP), often known as the dot plot, which depicts new economic estimates and where policymakers believe Federal Funds Rates will go in the medium and long term.
Bank of America (BofA) analysts expect the Fed will decrease interest rates by 25 basis points (bps) to 4.25%-4.5%. The CME FedWatch tool also reveals that market participants have fully priced in a 25 basis point interest rate cut.
With markets fully anticipating a typical rate decrease announcement, investors will concentrate on Fed Chair Jerome Powell’s news conference on interest rate guidance. According to BofA analysts, Powell will telegraph a gradual rate-cutting approach in the coming months, with a possible pause in January if economic indicators meet expectations.
Meanwhile, traders similarly convinced that the Fed would keep interest rates unchanged. The CME FedWatch tool predicts 4.25%-4.50% in January.
The US Dollar (USD) is trading flat ahead of the Fed’s policy decision, with the US Dollar Index (DXY) hovering near 107.00.
Daily market Update: EURUSD remains subdued, with Fed policy in focus.
EURUSD is trading on the sidelines as the US dollar consolidates ahead of the Fed’s policy decision. Meanwhile, the Euro’s (EUR) outlook remains gloomy, with investors expecting the European Central Bank (ECB) to raise the neutral rate to roughly 2% by the first half of 2025.
Traders predict the ECB to lower interest rates at each meeting until June 2025. Officials are deeply concerned about the mounting economic dangers in the Eurozone and are certain that Price pressures will steadily return to the central bank’s target level next year.
The ECB’s Rehn stated that inflation stabilizing near the central bank’s 2% objective opened the door for further interest rate decreases.
On Tuesday, ECB policymaker and Finnish central bank Governor Olli Rehn stated that inflationary pressures are stabilizing near the bank’s target of 2%, paving the way for additional interest rate cuts. Rehn declined to provide a precise rate cut plan, saying, “The speed and scale of the rate cuts will be determined in each meeting on the basis of incoming data and comprehensive analysis.”
When asked how the continent will face incoming tariff hikes from the US President-elect Donald Trump administration, Rehn said, “Negotiation preferable, and the European Union’s (EU) negotiating position can be strengthened by demonstrating in advance that it is ready to take countermeasures if the United States threatens.”
