The EURUSD currency pair was trading slightly up ahead of the Fed’s interest rate decision scheduled for 18:00 GMT. The most liquid currency pair gained as the euro rallied against the US dollar as many expect the US Federal Reserve to keep rates intact, which should be bearing for the US dollar.
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However, many will look to the Fed monetary policy statement and its dot plot to determine whether another rate hike is possible. Still, even without a rate hike, the US has the highest interest rates of any G7 country at the peak of 5.50%.
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If the Fed expresses a dovish stance on monetary policy going forward, it could trigger a more significant rally against the US dollar, but this is unlikely. The Fed will likely maintain a hawkish tone to prop up the dollar, especially if it keeps interest rates steady.
The US Dollar Index was trading down 17.8 pips at writing, which explains why the dollar was much weaker against the euro today. Yet, it had risen against the euro significantly, as evidenced by the downtrend experienced in the EURUSD currency pair since mid-July this year.
Market participants widely anticipate the Fed holding its interest rates steady amidst rising speculation of rate cuts at some point in Q2 2024.
Wael Makarem, Senior Market Strategist – MENA at Exness: “The US dollar stabilised to a certain extent after two months of gains as traders brace for the Federal Reserve's meeting later today. While the Federal Reserve is expected to leave interest rates unchanged today, Jerome Powell's comments and, in particular, the Fed's dot plot and economic projections could fuel some volatility as traders look for hints regarding the future steps in US monetary policy.”
“Interest rates in the US could remain at elevated levels for some time and could support the dollar against other currencies. The dollar could continue to see strength against the euro, which saw the European Central Bank adopt a softer tone after its latest interest rate hike. Traders will also focus on the Bank of England and the Swiss National Bank tomorrow and the Bank of Japan on Friday.”
The EURUSD price chart.
The EURUSD currency pair was trading up 20.8 pips (0.19%) ahead of the much-awaited FOMC rate decision.
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