![]() The European Central Bank (ECB) is likely to raise interest rates by 25bps today, but uncertainty lingers over the future of its tightening cycle. Moreover, trepidation ahead of the Eurozone’s own central bank interest rate decision limited gains. Nevertheless, EUR/USD encountered headwinds soon enough as USD bounced upward amid Fed optimism. This was attributed to an increase in capital goods production, as well as a rise in European energy production. Risk appetite in the currency market also helped to support EUR, alongside better-than-expected industrial production, data for the bloc: output climbed by 1% in April rather than the 0.8% expected. The Euro (EUR) firmed initially against the ‘Greenback’ midweek, as weakness in the latter ahead of the Fed’s interest rate decision buoyed the negatively-correlated single currency. Euro (EUR) Exchange Rates Benefit from USD Downtrend Staff at Reuters acknowledged that following the FOMC’s comments, the dollar index was little changed on the day, having recovered from four-week lows earlier in the session. Amongst other things, it was said that ‘in determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.’ The US unemployment rate ticked up slightly in May, which may have further dissuaded the central bank from tightening monetary policy this time around.Ĭheering investors, however, was a perceived-hawkish tone and hints that additional interest rate hikes may be needed ahead. ![]() The US Dollar (USD) trended broadly lower against its peers through the majority of the European session, but shot higher subsequently following the Fed’s interest rate decision and accompanying commentary from the Federal Open Market Committee (FOMC).Īs expected, the Fed left interest rates on hold at 5.25%, saying the full effect of earlier rate hikes have yet to be felt. US Dollar (USD) Exchange Rates Rebound despite Interest Rate Pause ![]() The Euro US Dollar (EUR/USD) exchange rate weakened on Wednesday evening following indications from America’s Federal Reserve Bank that additional interest rate hikes may be necessary in the near term.Īt the time of writing, EUR/USD is trading at $1.0830, having relinquished part of Wednesday's earlier gains. ![]()
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