EUR/USD experienced a notable increase of over 0.59% on Wednesday following the Federal Reserve’s anticipated rate cut. This “dovish hold” led traders to move away from the Dollar and invest in the Euro. Currently, the pair is trading close to daily highs of 1.1695, following a rebound from daily lows of 1.1620.
The EUR/USD pair is experiencing an upward movement, reaching daily highs and establishing a consolidation range between 1.1650 and 1.1700. The Federal Reserve has reduced interest rates by 25 basis points, leading to a widespread decline in the value of the Dollar. Powell indicates that the current policy stance is neutral, with any future adjustments contingent upon economic data.
> The dollar experiences a decline as Powell indicates a potential pause, while the euro gains strength driven by positive momentum : The Federal Reserve has made a decision to lower interest rates by 25 basis points, amidst dissent from three members, including Governor Stephen Miran, who advocated for a more aggressive reduction of 50 basis points. Two Regional Fed Presidents, Jeffrey Schmid and Austan Goolsbee, have opted to keep the current rates unchanged. The monetary policy statement has been largely consistent, indicating that employment risks are skewed to the downside, while inflationary pressures remain high. During his press conference, Fed Chair Jerome Powell recognized the tension inherent in the central bank’s dual mandate. In the Eurozone, the agenda was devoid of significant events; however, European Central Bank member Makhlouf expressed confidence that medium-term inflation will stabilize at 2%, as reported. Previously, ECB President Christine Lagarde indicated that the policy is positioned favorably and that the bank may revise their projections in December.
Latest FX Rate Trends : Euro strengthens as Powell puts pressure on the Dollar
- The US Dollar Index has declined, falling 0.58% to 98.68, reflecting a general weakening of the Greenback against key counterparts.
- Powell indicated that the central bank is “well positioned” to “wait and see” how the economy evolves, after a cumulative easing of 75 basis points this year. He indicated that the Fed funds rate is approaching the upper limit of neutrality estimates and that they will monitor economic data, which could be “distorted.”
- Following a reduction of 175 basis points, Powell remarked, “we have moved our policy back down to a level that is certainly not strongly restrictive at this point,” further stating, “I think it is sort of in the range of neutral.”
- The Summary of Economic Projections featured the “dot plot,” which reveals that a majority of members anticipate the fed funds rate to hover around 3.4% in the upcoming year, implying a potential 25 basis point reduction. In the extended outlook beyond 2028, Federal Reserve policymakers project neutral rates to hover around 3%.