EUR/USD steadies with Fed's monetary policy front and centre
- EUR/USD picks up to levels beyond 1.1630 after hitting weekly lows at 1.1615.
- The US Dollar trims some of its recent gains with traders positioning for the Fed's monetary policy decision.
- The pair is trading below a previous trendline support, now at the 1.1665 area.
EUR/USD is trimming some losses on Wednesday, trading at 1.1635 at the time of writing after bouncing from 1.1615 lows on Tuesday. Upside attempts, however, remain limited, with investors reluctant to place large US Dollar (USD) directional bets ahead of the US Federal Reserve's (Fed) monetary policy decision due later in the day.
The market has practically discounted a 25-basis-points Fed interest rate cut later this Wednesday, with the monetary policy committee likely to show the wider divergence in years. In this context, the central bank's rate cut projections, the so-called "dot plot," and the tone of Chairman Jerome Powell's ensuing press conference will be the main market movers.
On the macroeconomic data front, the release of the delayed US JOLTS Job Openings figures from September and October provided a positive surprise, which, together with the sticky PCE inflation numbers seen last week, adds to the case of a "hawkish cut" by the Fed.
US President Donald Trump, however, invited himself to the party on Tuesday, renewing his pressure for sharply lower interest rates, in an interview with Politico, although the impact on the US Dollar was minimal.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.11% | -0.13% | -0.02% | -0.13% | -0.01% | -0.03% | |
| EUR | 0.07% | -0.03% | -0.05% | 0.05% | -0.05% | 0.07% | 0.04% | |
| GBP | 0.11% | 0.03% | -0.02% | 0.09% | -0.02% | 0.10% | 0.07% | |
| JPY | 0.13% | 0.05% | 0.02% | 0.11% | 0.00% | 0.11% | 0.10% | |
| CAD | 0.02% | -0.05% | -0.09% | -0.11% | -0.11% | 0.00% | -0.01% | |
| AUD | 0.13% | 0.05% | 0.02% | -0.01% | 0.11% | 0.12% | 0.09% | |
| NZD | 0.00% | -0.07% | -0.10% | -0.11% | -0.01% | -0.12% | -0.03% | |
| CHF | 0.03% | -0.04% | -0.07% | -0.10% | 0.01% | -0.09% | 0.03% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily Digest Market Movers: Rangebound trading ahead of the Fed
- The US Dollar (USD) is ticking lower on Wednesday, after having appreciated over the previous two days. Price action, however, remains contained within recent ranges, with traders awaiting the outcome of the Federal Reserve's monetary policy meeting to make investment decisions.
- The Fed is widely expected to trim its Repo Rate by 25 basis points to the 3.50-3.75% band, but Chairman Jerome Powell might signal a monetary easing pause in the coming months and warn about upside risks to inflation.
- Investors will also be attentive to the bank's interest rate projection, which will be contrasted with the market expectations of two or three more rate cuts in 2026.
- US President Trump added pressure on the Fed in an interview with Politico published on Tuesday, calling Powell "not a smart person" for not lowering borrowing costs faster, and assured that the support for "immediately slashing interest rates" will be a litmus test for the election of the next Fed chair.
- White House economist Kevin Hassett, who is also the best-positioned candidate to replace Powell at the Fed, affirmed that there is "plenty of room" to ease monetary policy further, although he acknowledged that the situation might change if inflationary pressures rise.
- Meanwhile, the delayed figures by the US Labor Department revealed that job openings rose to 7.658 million in September and to 7.67 million in October, from 7.227 million in August, beating market expectations of a slight decline to 7.2 million.
- In Europe, the European Central Bank (ECB) President, Christine Lagarde, is set to take part in an event in London where she is expected to talk about the future of the Euro and the US Dollar as global currencies. She is unlikely to comment on monetary policy as the bank is in the blackout period ahead of next week's monetary policy meeting.
Technical Analysis: EUR/USD has broken below the ascending trendline
Technically, the EUR/USD confirmed the breach of the ascending trendline from November 20 lows on Tuesday, a bearish signal. Oscillators are also pointing lower. The 4-hour Moving Average Convergence Divergence (MACD) remains below zero, highlighting a mild bearish momentum, although the 4-hour Relative Strength Index (RSI) is attempting to return above the 50 level.
Bulls will need to break Tuesday's high, at 1.1657, and the reverse trendline, now at 1.1665 area, to ease bearish pressure and aim for last week's high, at 1.1682. Further up, the target is the October 17 high, near 1.1730.
To the downside, immediate support is at Tuesday's low of 1.1615, ahead of the December 1 and 2 lows around 1.1590 and the November 26 and 28 lows in the 1.1550-1.1555 area.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
