Home Sports The EUR/USD rate forecast depends on the FOMC’s rate decision

The EUR/USD rate forecast depends on the FOMC’s rate decision


Topics of conversation about the euro exchange rate

EUR/USD attempts to restore the slump caused by stickiness in US Consumer Price Index (CPI) as it trades above parity, but the Federal Reserve’s interest rate decision could affect the near-term outlook for the exchange rate as the central bank is expected to maintain its current approach to tackling inflation.

Fundamental Outlook for the Euro: Neutral

euro/USD consolidating after clearing the opening range in September, the exchange rate may make another attempt to test the 50-day SMA (1.0096) as it holds above the yearly low (0.9864).

However, EUR/USD may continue to track the negative slope of the moving average Federal Open Market Committee (FOMC) is expected to raise rates by another 75 bps, and the committee could prepare US households and businesses for further increases in US interest rates as “participants felt that a move to an accommodative policy stance was necessary to meet the legislative mandate Committee. »

As a result, the interest rate increased by 75 bp. along with sharp forecasts could trigger a bearish reaction in EUR/USD as European Central Bank (ECB) shows little interest in implementing restrictive policies, and it remains to be seen whether the chairman’s new predictions Jerome Powell and Co. will influence the near-term outlook for the exchange rate as the central bank is due to update its Summary of Economic Outlook (SEP).


Source: FOMC

The Fed could use the SEP to reinforce its anti-inflation commitment as Chairman Powell & Co predicts a steeper path for US interest rates, and another upward correction on the interest rate chart could push EUR/USD to a yearly low (0.9864 ). ), as the FOMC follows its hiking cycle.

Meanwhile, the same from Fed officials could point to an impending shift in FOMC policy as the Fed rate is forecast to peak around 4.00% and EUR/USD could recover more in the near term. the central bank is showing a greater willingness to raise rates less.

That being said, EUR/USD may face limited conditions ahead of the Fed’s rate decision as market participants await fresh forecasts from Fed officials, but the exchange rate may struggle to hold off gains from the annual low (0.9864) when the Central Bank arrives predicts a steeper path for US interest rates.

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— Posted by David Song, Currency Strategist

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