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Euro US Dollar Exchange Rate Tumbles as Federal Reserve Confirm Stimulus Pullback

Euro US Dollar

The Euro US Dollar (EUR/USD) exchange rate has tumbled this morning following the latest meeting minutes from the Federal Open Market Committee (FOMC) yesterday evening.

At the time of writing the EUR/USD pairing are trending around the $1.1677 level as the Euro is unable to find any support on the back of an absence of economic data.

Euro (EUR) Weakens as Markets Digest FOMC Meeting Minutes

The Euro has weakened against the US Dollar this morning following the latest outcome from the FOMC meeting minutes.

A lack of economic data is also limiting the appeal of the single currency this morning as the Euro struggles to find any kind of support.

The outcome of the FOMC meeting minutes saw markets become more jittery as the Fed look to taper the pace of asset purchases towards the end of the year.

James Knightley, chief international economist at ING, commented on the minutes, saying:

‘The minutes to the July FOMC meeting show a Fed that is pretty split on most things, but recognises that we are getting much closer to the point of tapering.’

‘Officials have offered more vocal support in recent days to earlier action and we are pencilling in a September announcement, but it is clear that the Covid resurgence could delay it.’

US Dollar (USD) Bolstered by Latest FOMC Meeting Minutes

The US Dollar has found itself bolstered across the board this morning following the FOMC meeting minutes yesterday evening.

Whilst no decisions were officially made, the committee pushed towards pulling back in their amount of economic stimulus sooner-than-expected.

Andrew Hunter, senior US economist at Capital Economics, commented on what he expects from the Fed moving forward:

‘With a growing number of officials now openly discussing the possibility of tapering beginning soon on the back of July’s strong employment report, it looks more likely than not that the wind-down will begin later this year, rather than early next year as we had previously thought.’

‘While there is clearly support from some of the more hawkish officials for a relatively quick taper finishing early next year – leaving plenty of scope for rate hikes to potentially begin later in 2022 – the minutes also noted that “several” officials thought that “an earlier start to tapering could be accompanied by more gradual reductions in the purchase pace”.’

The US Dollar could find itself further supported this afternoon if initial US jobless claims continue to fall at pace.

Euro US Dollar Exchange Rate Outlook: Fed Kaplan Speech in Focus

A lack of economic data from both the Eurozone and US tomorrow will see investors keeping an eye on the global market mood and any further coronavirus developments to drive movement in the pairing.

If the US Dollar continues to perform well, and the market mood sours further then the Euro could be on the back foot heading into the week.

A speech from Federal Reserve president Robert Kaplan could provide fresh impetus for the ‘Greenback’ to head higher if he continues to take a hawkish stance towards the US’s economic recovery.