EURUSD risen rapidly above 1.1150 as investors expect the Fed to continue its aggressive policy easing cycle.

EURUSD rises above 1.1150 in Thursday’s European session, aided by a weaker US Dollar (USD), as the dust settles on the Federal Reserve’s (Fed) massive interest rate decrease and prospects of additional policy easing. The USD, as measured by the DXY USD Index, falls down below 100.70 after failing to maintain a weekly high above 101.50.

The Fed expects interest rates to fall to 4.4% by year-end.

The Fed made its first interest rate drop in more than four years, reducing its key borrowing. Interest rates will rise 50 basis points (bps) to 4.75%-5.00%. The Fed’s substantial drop suggested that policymakers dedicated to averting further deterioration in labor market conditions and convinced that inflation will fall below the bank’s objective of 2%.
Fed Chair Jerome Powell stated at the news conference following the policy decision. That the United States (US) is not facing a recession or even a slowdown. Market participants expect the Fed’s policy-easing cycle to be more aggressive than that of other central banks.
According to the CME FedWatch tool, the central bank is likely to decrease interest rates by 75 basis points in the two remaining meetings this year, implying that there will be another 50 basis point rate cutbCut in either November or December. According to 30-day Federal Funds Futures price data, 35% of investors believe the Fed will drop interest rates by 50 basis points to 4.25%-4.50% in November, while the remainder believe rates would be cut by 25 basis points.
On the contrary, the Fed’s dot plot indicated that officials expect the federal funds rate to rise to 4.4% by the end of the year.
Investors now focus on the Initial Jobless Claims data for the week ending September 13, which will be release at 12:30 GMT. The number of people receiving unemployment benefits for the first time is likely to remain stable at 230K.

Daily market movers: EURUSD rises on US dollar weakening.

EURUSD increases at the expense of the US dollar, but the outlook for the Euro (EUR) is uncertain due to a growing debate about the European Central Bank’s likely interest rate path. The ECB policymakers are divided over the policy-easing pace due to mixed views on the inflation outlook.

ECB Nagel stated that inflation remains higher than the ECB would like to see.

ECB Governing Council member Peter Kazimir and President of Deutsche Bundesbank Joachim Nagel said they want to see more evidence to make sure that inflation will return to the levels the bank wants to see. Nagel said on Wednesday that he supports keeping interest rates sufficiently high to resolve price pressures, Reuters reported. On the contrary, ECB Governing Council member and Bank of France President François Villeroy de Galhau said last week that more rate cuts needed to avoid the risk of inflation coming in too low. The comments from Villeroy came when the ECB announced the second interest rate decrease of its current policy-easing cycle.
Market participants currently expect the ECB to slash interest rates once more during its remaining monetary policy meetings this year.