Risks in EUR/USD are pointing to the downside – Commerzbank


Today’s main event is the FOMC meeting. Economists at Commerzbank analyze how the US Dollar and the EUR/USD pair could react to the Fed policy announcement.

Market sees no chance of a further rate hike

“The market expects the Fed to hike rates by 25 bps resulting in a key rate corridor of 5.0%-5.25%. This step has been fully priced in by the market and will therefore not cause much of a reaction in the Dollar.”

“Following today’s step, the market sees no chance of a further rate hike. A moderately hawkish statement that refers to continued high inflation levels and does not exclude further tightening would make rate cuts this year seem less likely, meaning the market would have to adjust its expectations. This is likely to support the Dollar against the Euro, as it would tarnish the market’s conviction that the ECB is acting in a much more decisive manner than the Fed.”

“As we consider it to be unlikely that the Fed will signal a rate pause at this stage, the risks in EUR/USD as a result of today’s Fed meeting are therefore rather pointing to the downside.”


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