EURUSD maintains gains over 1.1100 as the US Dollar remains under pressure ahead of the Fed’s policy meeting at 18:00 GMT.
EURUSD remains over 1.1100 in Wednesday’s European session, ahead of the Federal Reserve’s (Fed) monetary policy decision at 18:00 GMT. The major currency pair rises as the US Dollar (USD) stays under pressure as the Fed prepares to announce its first interest rate drop in more than four years.
The US Dollar Index (DXY), which analyzes the value of the greenback against six major currencies, struggles to maintain its rebound to near 101.00, a rally fueled by better-than-expected monthly retail sales figures from the United States (US) in August.
Traders become increasingly convinced that the Fed will cut interest rates by 50 basis points.
Market participants are more confident that the Fed will quickly begin the policy-easing cycle, as officials have expressed concern about a slowing in job creation. Furthermore, they are optimistic that inflation is falling toward the bank’s 2% target.
Daily Market Movers: EURUSD remains over 1.1100 in Wednesday’s European session, ahead of the Federal Reserve’s (Fed) monetary policy decision.
According to the CME FedWatch tool, 30-day Federal Funds Futures price data reveals that the central bank’s likelihood of decreasing rates by 50 basis points (bps) to 4.75%-5.00% is 65%, with the remainder favoring a 25-bps rate cut.
In addition to the Fed’s decision, the US dollar will be influence by the Fed’s dot plot, economic estimates, and the Fed’s press conference. Despite Thursday’s dovish decision, there is a risk that inflation will be too low. In Wednesday’s Asian session, Villeroy stated that the ECB “is likely to continue to cut rates.”
On the contrary, ECB Governing Council member Peter Kazimir stated in a blog post on Monday that “we will almost certainly need to wait until December for a clearer picture before making our next move,” according to Reuters. Kazimir stressed the importance of ensuring that price pressures continue to fall as expected, stating that “otherwise policymakers might regret rushing to cut borrowing costs before inflation has been sustainably defeated”.
Financial market participants anticipate that the ECB will drop interest rates once more during one of its remaining meetings this year, either in October or December.
In According to the Eurozone schedule, Eurostat will release the final reading of the Harmonized Index of Consumer Prices (HICP) for August at 09:00 GMT. Economists predict the data to be consistent with preliminary forecasts, with annual headline inflation at 2.2% and core inflation at 2.8%.
