Fed policy to support EURUSD

02 May 2024 95
Fed policy to support EURUSD

Speaking to reporters after yesterday's U.S. central bank meeting in Washington, Fed Chairman Jerome Powell said price growth is likely to resume its slowdown this year, but refrained from giving a timeline for rate cuts.

He kept hoping for lower interest rates this year, while acknowledging that a spike in inflation has reduced policymakers' confidence that price pressures are easing.

Powell’s remarks reflect a broader shift in the Fed’s thinking toward holding borrowing costs at a two-decade high for longer. This change in attitude, first stated last month, became the culmination of rising inflation, hiring and consumer spending for several months that has also led to a fall in investors’ expectations from six rate cuts this year to one.

The Fed kept interest rates unchanged in the range of 5.25–5.5%, where they have been since July. Recently in March, Powell said that it would be quite reasonable to start lowering rates “at some point this year.” He did not repeat this phrase again yesterday. The Fed Chair also established tighter conditions for further rate hikes, saying that such a step is unlikely.

Powell’s comments ease investors' fears that the central bank’s governor would be strongly against rate cuts this year or even would suggest a potential hike.

The EURUSD currency pair strengthened during the press conference, which became even more noticeable when Powell said that rate hikes are unlikely.

As the Fed yesterday showed a looser approach than expected, this will probably contribute to further growth of EURUSD quotes.

The overall recommendation is to buy ЕURUSD.

Profits should be taken at the level of 1.0800. A Stop-Loss could be set at the level of 1.0550.

The possible loss should not exceed 2% of your deposit funds.

This content is for informational purposes only and is not intended to be investing advice.

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