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Euro US Dollar Exchange Rate Volatile as Markets Await Federal Reserve Decision

Euro US Dollar

The Euro US Dollar (EUR/USD) exchange rate has been volatile since markets opened as investors brace for the latest interest rate decision from the Federal Reserve.

At the time of writing the EUR/USD pairing are trending around the 1.1804 level as the recent German consumer confidence index failed to meet expectations.

Euro (EUR) Undermined by Lacklustre GfK Consumer Confidence

The Euro has found itself undermined against the US Dollar today as a lacklustre consumer confidence index from the Eurozone’s largest economy, Germany, did nothing to support the single currency.

Consumer confidence in Germany remained at -0.3 as the country begins its recovery from the worst of the pandemic.

Rolf Bürkl of GfK who compiles the survery, commented:

‘The phase where the decrease of COVID-19 incidence of infection has come to an end and those figures are again on the rise. In addition, the momentum for vaccination has recently slowed down considerably, despite there being sufficient quantities of the vaccine available. This is currently preventing any further significant increase as it pertains to consumer sentiment.’

Limiting any support for the Euro was also a resurgence in the US Dollar ahead of the Federal Reserve interest rate decision later this evening.

Due to the negative correlation between the pairing the Euro has suffered against many of the majors throughout the day.

US Dollar (USD) Bolstered Ahead of Federal Reserve Decision

The US Dollar has been supported during today’s session as investors await the latest interest rate decision from the Federal Reserve.

Whilst no policy changes are expected from the Fed, markets are rallying to the safe-haven ‘Greenback’ all the while US treasury yields rise.

Analysts at Danske Bank commented on what to expect from the Fed tonight, saying:

<blockquote> ‘We do not expect the Fed to send any new policy signals. We expect the Fed to repeat that high inflation is mostly transitory and that the labour market recovery has further to go still.’ </blockquote>

More so, the souring market mood provides a further boost to USD exchange rates throughout today’s European session.

Euro US Dollar Exchange Rate Outlook: Employment Figures in Focus

A range of economic data from both the Eurozone and US is expected to drive movement in the EUR/USD pairing tomorrow.

German unemployment change and inflation figures could provide the single currency with much needed support.

Whilst the US Dollar will look towards the reaction from markets surrounding the Fed’s decision alongside initial US jobless claims.