EUR/USD Steady Ahead of Fed, Markets Eye Energy Risks
EUR/USD moved within a limited range, tending to stabilize in the 1.1530–1.1550 range in early Asian trading on Wednesday. The pair's movement remained relatively restrained as investors remained cautious ahead of the Federal Reserve's (Fed) policy decision scheduled for today.
The US dollar held firm ahead of the decision, limiting the euro's upside after EUR/USD posted gains in the previous two sessions. The market believes current sentiment is driven more by position adjustments than by a new trend.
According to the CME FedWatch Tool, the Fed is widely expected to maintain its benchmark interest rate in the 3.50%–3.75% range for March. If realized, this would be the second consecutive pause, reflecting a cautious approach amidst economic and geopolitical tensions.
Market participants' primary focus is on Fed Chairman Jerome Powell's guidance, particularly regarding the impact of oil prices on the inflation outlook and policy direction. Oil prices have strengthened amid Middle East tensions, while the security dynamics of shipping lanes around the Strait of Hormuz add another layer of risk to global energy markets.
From the European perspective, rising energy prices mean increased inflationary pressures and complicate the European Central Bank's (ECB) policy space. The ECB announced its decision on Thursday, with market expectations of maintaining the deposit facility rate at 2.0% for March.
Before the geopolitical escalation, the market had expected the ECB to maintain policy unchanged throughout 2026. However, the change in inflation assumptions has led some market participants to consider the possibility of faster tightening, including a possible rate hike as early as July, in line with cautious signals from policymakers such as Peter Kazimir. (asd)
Source: Newsmaker.id
