Why is the Fed pushing the euro-dollar?
EUR/USD Reaches Annual Highs Near 1.1040 Due to the Federal Reserve
The EUR/USD pair is climbing to yearly highs near 1.1040, and the reason behind it is the Federal Reserve.
The American central bank is under the spotlight of currency markets and beyond, as investors await the September meeting to see if expectations for an initial rate cut will be met.
USD Weakens on Expectations of Accommodative Policy by the Fed
The US dollar has been weakened by growing expectations of an accommodative policy from the Fed, with statements from FOMC members supporting this outlook.
A declining greenback, coupled with lower bond yields, has helped gold maintain its value at $2,500 per ounce, near the historical high of $2,509.69.
EUR/USD Rises as Fed Signals Rate Cut: What’s Next for US Rates?
Markets began the week with the dollar falling, amid expectations that the US economy had avoided a recession and that cooling inflation would lead to a cycle of interest rate cuts.
Federal Reserve members Mary Daly and Austan Goolsbee hinted over the weekend at the possibility of monetary easing in September, with minutes from the upcoming policy meeting this week expected to underscore accommodative prospects.
Upcoming Events and Market Expectations
Jerome Powell is set to speak at Jackson Hole on Friday, with investors anticipating his acknowledgment of the need for a rate cut.
While it may be too early to celebrate, central bankers will likely be cautious in their official rhetoric, notes Barclays economist Christian Keller.
Despite the anticipation of Fed monetary easing, Jonas Goltermann from Capital Economics suggests that the dollar could remain under pressure in the short term.
The European Central Bank (ECB) is also being closely watched for its September meeting, as Lagarde and other members have not hinted at the continuation of monetary policy.
The euro, benefiting from the dollar’s weakness, is also in focus due to the Eurozone’s weaker economic conditions compared to the US.
