Euro: 1.150 target nears on Fed risk against US Dollar – ING

FXStreet Insights Team FXStreet

ING’s Francesco Pesole highlights that the Federal Reserve announcement could push EUR/USD towards the 1.150 target. He notes that below 1.150 risks become more balanced given technicals, short-term valuation and rate differentials, while both Fed and ECB are seen on hold, allowing dovish repricing in EUR and USD curves and potentially putting a floor under EUR/USD alongside lower energy prices.

Pair eyes 1.150 as risks rebalance

"Today’s Fed announcement can take EUR/USD closer, if not all the way, to our 1.150 target. We are not ready to call an imminent end to the decline given the energy price backdrop, but below 1.150 the risks should become more balanced from a technical/short-term valuation perspective. Short-term rate differentials wouldn’t accommodate big moves lower, and the risks of any political/domestic risk premium build-up appear more concentrated on the US ahead of the midterms than the eurozone (even though the French budget is a concern)."

"Looking a bit further ahead, our macroeconomists’ calls for no further hikes by both the Fed and ECB imply room for sharp dovish repricing in both the EUR and USD curves. A coordinated move lower in front-end rates can put a floor under EUR/USD, as would likely happen alongside a decline in energy prices. Lower USD funding costs usually have a positive knock-on effect on global sentiment."

"Elsewhere, EUR/GBP is trading a tad higher this morning after UK inflation figures printed in line with consensus. Headline CPI accelerated from 2.9% to 3.1% in August, but there is still no evidence of accelerating inflation in core and services. That’s something Bank of England doves can cling to tomorrow, tilting the balance to a more dovish message relative to very hawkish market expectations."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.