Homepage » News » Euro US Dollar (EUR/USD) Exchange Rate Fluctuates Ahead of Fed Decision

Euro US Dollar (EUR/USD) Exchange Rate Fluctuates Ahead of Fed Decision

Euro US Dollar

Euro US Dollar Exchange Rate Wavers as Fed Decision Approaches

The Euro US Dollar (EUR/USD) exchange rate is range bound today ahead of the US Federal Reserve’s interest rate decision. Analysts think it unlikely the central bank will be planning to taper imminently, but investors hope for hawkish signalling nonetheless.

At the time of writing, EUR/USD is trading at $1.1726, virtually unchanged from today’s opening levels.

US Dollar (USD) Trades Mixed on Policy Speculation

The US Dollar (USD) has fallen against several of its peers as uncertainty sets in ahead of the Federal Reserve’s announcement this evening. The Fed is expected to keep its interest rate the same at 0.25%, but may reveal new forward guidance.

Investors are hoping for a hawkish commentary, encouraged by comments from leading economists. Representatives from TDS Bank remark that ‘officials will likely signal that they are almost ready to taper’, while ING analysts predict ‘a more explicit acknowledgement that QE tapering will start this year.’

Others are not so sure. Danske Bank ‘expect[s] the Fed will refrain from providing more details’, while Nordea ‘are not certain that the Fed will dare to present a firm tapering plan’. The mixed predictions are weighing upon USD sentiment, triggering a bearish outlook amidst additional headwinds.

Developments over Chinese real-estate company Evergrande look promising, as the firm has pledged to pay off some of its debt, reassuring investors previously concerned over the prospect of another ‘Lehman moment’.

The move has prompted a risk-on mood, pressuring the US Dollar alongside waning Covid fears: Australian Tourism Minister Dan Tehan told reporters at a National Press Conference that Australia plans to open its international border by Christmas at the latest.

Euro (EUR) Finds Some Support as Election Looms

The Euro (EUR) is trading mixed against several of its peers today as election headwinds dampen an otherwise bullish mood. The single currency found support on USD weakness and better-than-expected consumer confidence for the month of September.

As a result of the strong negative correlation between USD and EUR, headwinds for the former lend strength to the Euro, as today’s risk-on market mood has shown. Positive developments regarding Evergrande, in addition to an optimistic Australian travel outlook, have helped to support the single currency.

This afternoon’s consumer confidence data also helped to buoy EUR prospects, printing at -4 as opposed to the -5.8 expected. Considering the EU as a whole, consumer morale rose by 1.1 points amid vaccination optimism and a brighter economic outlook.

Germany’s election campaign is likely to exert headwinds until at least Sunday, when the results will be announced. Chancellor Angela Merkel has joined Armin Laschet, her successor at the CDU/CSU, in an effort to boost his campaign: center-left candidate Olaf Scholz remains in the lead, however.

Euro US Dollar Exchange Rate Forecast: Fed Decision to Steer Movement Going Forwards

Looking ahead, the Federal Reserve’s interest rate decision and subsequent press confidence are likely to inspire immediate movement in the EUR/USD exchange rate. If the central bank strikes a dovish tone, the ‘Greenback’ will likely accrue losses, boosting the Euro by comparison.

Subsequently, European PMI data from Germany and the Eurozone may influence tomorrow’s trading dynamics: both sets of data look set to fall on last month, potentially inspiring EUR headwinds.