EUR/USD Suddenly Stagnates Near 1.2000—Will the Fed "Leak" Interest Rate Direction?
EUR/USD began to fall slightly to the 1.1990 area at the start of the European session on Wednesday (January 8th), breaking a four-day uptrend. This correction occurred after the pair briefly touched a five-year high, but was then held back by renewed demand for the US dollar (USD). Market focus is now fully focused on tonight's Federal Reserve (Fed) interest rate decision.
The situation escalated after US President Donald Trump said he would soon announce his choice for the new Fed Chair. Trump also implied that interest rates would decrease under the new leadership. This statement has raised market concerns about the Fed's independence—if its independence is deemed "impaired," the USD could be under pressure, which is usually a positive sign for EUR/USD.
For today's decision, the market expects the Fed's interest rate to remain in the 3.50%–3.75% range. The most anticipated outcome is the tone of the press conference: whether the Fed will signal when it will begin cutting interest rates. From the European perspective, the ECB appears relaxed as inflation is near its target, and they are adopting a "data first, decisions later" approach at each meeting. Consequently, the direction of EUR/USD will be largely determined by one factor: how dovish (or hawkish) the Fed's tone is tonight. (az)
Source: Newsmaker.id
