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Euro US Dollar (EUR/USD) Exchange Rate Languishes as Two-Year low Following Hawkish Fed Rate Cut

EUR/USD Exchange Rate Weakened by Bullish FOMC Outlook

The Euro US Dollar (EUR/USD) exchange rate is stuck on the defensive today as markets continue to digest the Federal Reserve’s latest policy decision.

At the time of writing the EUR/USD exchange rate is currently trading at $1.1034, down around0.3% so far this morning and leaving the pairing at a two-year low.

US Dollar (USD) Surges on Hawkish Fed

The US Dollar (USD) continues to ride high today on the back of the Fed’s rate decision on Wednesday.

As was widely anticipated the Federal Open Market Committee (FOMC) voted to implement its first rate cut in over a decade last month, lowering rates by 0.25%.

However with market having priced in the move for week’s the cut itself failed to exert any downward pressure on the US Dollar.

Instead USD exchange rates were boosted by what was largely viewed as a hawkish meeting by the Fed, with the FOMC’s vote to cut rates not being unanimous as some policymakers pointed to the continued momentum in the US as reason to keep rates on hold.

Fed Chair Jerome Powell signalled that the cut was more of an ‘insurance policy’ designed to ensure that US economic conditions remain favourable, in the face of risk posed by the US-China trade war.

Powell said:

‘We see those as threats to what is clearly a favourable outlook. And we see this action as designed to support them and keep that outlook favourable.’

However, while the Fed currently appears reluctant to pursue further rate cuts, analysts suggest that should economic conditions deteriorate the bank is likely to step in with more stimulus measures.

Euro (EUR) Dented by Gloomy Manufacturing Data

At the same time, the Euro (EUR) is struggling to find support this morning after the Eurozone’s latest PMI figures confirmed that the bloc’s manufacturing sector slowed to a six-year low in July.

IHS Markit confirmed that the Eurozone’s factory sector saw its largest decline in growth in over six years last month.


The disappointing result is likely to put more pressure on the European Central Bank (ECB) to begin lowering interest rates when it meeting next month.

EUR/USD Exchange Rate Forecast: US Dollar to Weaken as US Payrolls Drop?

Looking ahead to the tail end of this week’s session, the Euro US Dollar (EUR/USD) exchange rate may be able to mount a recovery on the back of the latest US non-farm payroll report.

Analysts predict the key data will reveal that US employment growth slowed from 224,000 to 164,000 in July, potentially resulting in the US Dollar relinquishing ground as it increases the case for another rate cut from the Fed.

In the meantime the publication of the Eurozone’s latest retail sales figures may help to bolster the Euro on Friday morning.

Economists forecast that after contracting through April and May sales growth will have rebounded in June, closing out the second quarter on a more positive note and bolstering hopes that this momentum will carry through to the third quarter.