The EURUSD exchange rate awaits a pivotal US Federal Open Market Committee meeting.
EURUSD – Daily Chart
The EURUSD exchange rate is trading at 1.1255 with resistance above 1.1392. Support comes in below 1.0963 and that is creating a breakout zone for further upside or downside.
EURUSD has economic data on Tuesday with retail sales from the United States with investors for a continuation from last month’s 1% growth. The consumer is a huge part of the US economy but they have been stretched with economic conditions and higher interest rates.
Those interest rates will start to come down this week with the Federal Open Market Committee’s decision on Wednesday. Investors are braced to see if the Fed officials will cut by 25 or 50 basis points.
Speculation that the Fed may cut interest rates by 50 bp at next week’s meeting boosted stocks last week after former New York Fed President Dudley said there’s “a strong case for a 50 bp rate cut”. According to the swaps market, the chances of a 50 bp rate cut next week rose to 53% Friday from 17% on Wednesday.
The current Chicago Fed President Austan Goolsbee was also showing a dovish tone, saying policymakers have an “overwhelming” consensus for rate cuts. Markets will now look to the important services PMI data, where a weaker number could bring up recession fears.
The European Central Bank moved again last week with its own latest rate cut to the 3.5% level. The ECB chief Christine Lagarde said at the press conference that progress was being made in the bank’s fight against inflation. Lagarde said that inflation was on a “declining path,” but warned that the battle was not over.
Central banks have also been keen to lower rates with a weak financial backdrop in Western countries. Lagarde also said that there was no set agenda for rate cuts, saying:
“We shall be data dependent, we shall decide meeting by meeting,” she told a press conference. The central bank left its inflation forecasts unchanged from its last projections in June, predicting a fall to its 2% target in 2026.
The EURUSD range could be tested this week and lead to a new path for the pair.
