On Wednesday, EUR/USD experienced a decline exceeding 0.60%, trading below the 1.2000 level. This movement comes as the Federal Reserve maintains its current interest rates, with Fed Chair Jerome Powell opting not to address political inquiries, thereby adopting a neutral position on monetary policy. Currently, the pair is trading at 1.1955.
The EUR/USD pair experiences a decline of more than 0.6% following the Federal Reserve’s decision to maintain interest rates, with Powell emphasizing the importance of data in future policy decisions. Bessent’s comments on the strong Dollar counteract the selling pressure initiated by Trump, resulting in a broad uplift of the Greenback. ECB officials caution that prolonged Dollar weakness may fall short of Eurozone inflation objectives.
> The Euro experiences a decline as the Federal Reserve indicates a stance of patience, alongside signs of labor stability and stronger fundamentals for the Dollar: Jerome Powell skillfully avoided inquiries concerning political matters and his future at the Federal Reserve following the conclusion of his term. Regarding monetary policy, Powell indicated that there was widespread backing for the decision, highlighting that policymakers will stay data-dependent and will evaluate conditions on a meeting-by-meeting basis. Regarding the labor market, Powell indicated that conditions have stabilized, although inflation continues to be somewhat elevated. He noted that core PCE inflation is expected to hover near 3%, and indicated that he anticipates price pressures to reach their zenith around the middle of the year. In an interview, Scott Bessent stated that they do not engage in market interventions to influence the Japanese Yen. He noted that the “US always has a strong dollar policy, but a strong dollar policy means establishing the appropriate fundamentals.” Bessent’s comments overshadowed US President Donald Trump’s remarks on Tuesday, in which he stated that the Dollar was doing “great,” when questioned about the depreciation of the Greenback. His response signaled a go-ahead for traders, leading to a decline in the US Dollar Index to levels not seen in four years. In the Eurozone, GfK Consumer Confidence in Germany for February showed an improvement. Meanwhile, members of the European Central Bank voiced concerns about a declining US Dollar, cautioning that it may lead to inflation falling below the ECB’s 2% target.
Latest FX Rate Trends: Euro remains stable as US Dollar gains strength
- The Euro declines as the dollar strengthens in anticipation of the Federal Reserve’s meeting. The US Dollar Index, which measures the strength of the American currency against six other currencies, is currently up 0.55% at 96.34.
- The Federal Reserve maintained interest rates at 3.50%–3.75% during its most recent policy meeting, which resulted in a divided vote. Stephen Miran and Christopher Waller—one of President Trump’s nominees to succeed Jerome Powell—supported a reduction of 25 basis points in interest rates.
- A Fed policymaker emphasized that inflation is still “somewhat elevated,” while also observing that the unemployment rate appears to be stabilizing. Officials indicated that the economic outlook continues to be uncertain and emphasized that future decisions will be influenced by both aspects of the dual mandate.
- The German GfK Consumer Confidence index increased to -24.1, up from -26.9 in January. The survey indicated that the inclination to purchase showed improvement, while the tendency to save remained largely consistent in January. Expectations regarding the economy and income have shown improvement.
- Francois Villeroy de Galhau of the ECB stated, “We are closely monitoring this appreciation of the euro and its possible implications for lower inflation.” The depreciation of the US Dollar relative to the euro indicates a decline in confidence, stemming from the uncertainty surrounding US economic policy.
- Last summer, ECB Vice President Luis de Guindos indicated that a EUR/USD exchange rate near 1.20 would be acceptable, but cautioned that exceeding that level could present difficulties.
- According to Prime Market Terminal data, market participants anticipate a reduction of 44 basis points by the Federal Reserve as we approach year-end.