With Feds Announcement On Interest Rates, EUR/USD Pair Has Recorded A 6-Month High

With Feds Announcement On Interest Rates, EUR/USD Pair Has Recorded A 6-Month High

December 17, 2022 0 By Wiley McDermott

Just a few days back, the value of the dollar hovered in the higher zone against all major currencies, including the euro. This was because it was expected that the US Feds would again hike the interest rates.

The Feds did react in the same manner as expected because they announced that they will be hiking the interest rates. The Feds confirmed that the interest rate hikes would continue and the next one would be for 50 bps.

Although the traders had expected that the Feds would increase the interest rates by 75 bps, the Feds decided to lower them.

Still, it was a hike and the traders expected that the trading price of the dollar would continue gaining strength against all major currencies.

Things Worked Out Differently

Although the trading price of the dollar gained strength against the major currencies it was not able to do the same for the euro.

The entire investment community was in shock as they saw the trading price of the euro experience a huge surge against the dollar.

To everyone’s shock, the value of the EUR/USD pair has been pumped to a 6-month high. The data shows that the value of the euro is currently sitting at 1.0696 against the dollar.

The most shocking sight was the price of the dollar not being able to gain momentum against the euro despite the hawkish remarks from the US Feds.

Jerome Powell, the head of the US Federal Reserve has confirmed that their stance would remain hawkish towards the interest rate hikes.

Interest Rate Hikes by the Feds and the FOMC Forecast

According to the FOMC members, the forecast set for the final percentage of the interest rates in the US by the end of 2023 is 5.1%.

Previously, the same members had set the forecast to 4.6%, which was done in the month of September.

The market had expected that the Feds would try their best to remain within the 5% mark when it came to the interest rate hikes. However, the Feds have decided to breach the level and take it beyond that.

They have decided that the final interest rate would be 5.1%, which is very significant for the country’s economy.

The Feds have been doing this because they are finding more cushion with the inflation rates going downward. The inflation rates have been moving downward and are lower than expected.

As per many investors and expert economists, the inflation rate in the US has reached its peak point. Now, it is moving downward, which means that the Feds would eventually lower the interest rate hikes.

Now that the investors have a clear forecast for the interest rate hikes in sight for the US, they are no longer as excited about the dollar as before.

Euro has resisted the US Feds Decision

Despite the hawkish approach from the US Feds, the euro has continued resisting the increasing strength of the dollar.

Following the hawkish comments, the stock markets as well as the cryptocurrency market experienced a downtrend. With the dollar price lowering, the stock markets went downwards.

Similarly, cryptocurrencies lost their strength against the rising price of the greenback. Prior to the announcement, the crypto industry was bullish but has turned bearish.

On the other hand, the euro has remained bullish against the dollar helping it hit a 6-month high, moving closer to hitting 1.07.

Euro Investors are trying to Take Profit

It seems that the inflation rates in the European region were not as alarming as in the US. This is because a few interest rate hikes by the ECB have helped bring them under control tremendously.

Therefore, the ECB is thinking about lowering the interest rate hikes in the upcoming days. As the interest rate hikes lower, the value of the euro would weaken as well.

With the interest rate decline in sight, investors are trying their best to make the most out of the current market situation of the euro.