EUR/USD holds firm as Fed and ECB decisions loom
The Euro (EUR) is treading water against the US Dollar (USD), as investors stay cautious ahead of this week’s twin central bank decisions from the Federal Reserve (Fed) and the European Central Bank (ECB).
At the time of writing, EUR/USD is hovering around 1.1639 during the American trading hours, while the US Dollar Index (DXY), which tracks the Greenback’s performance against six major peers, is trading under mild pressure near 98.88.
Traders are positioning defensively as they await policy clues from both sides of the Atlantic. The Fed begins its two-day Federal Open Market Committee (FOMC) meeting on Tuesday, with markets almost certain the central bank will deliver another 25-basis-point (bps) interest rate cut this week, following September’s so-called “risk-management” move. Expectations for further easing strengthened after softer-than-expected US inflation data last week.
According to the CME FedWatch Tool, traders now assign a 96.7% probability of a quarter-point rate cut at the October 29-30 meeting, as officials respond to cooling inflation data and signs of a softening labor market, even though price pressure remains above the Fed’s 2% target.
In contrast, the ECB is widely expected to keep its benchmark rate unchanged at 2.00% for a third consecutive meeting, as policymakers assess recent signs of improvement in Eurozone business activity and stabilizing inflation. Eurozone inflation remains broadly stable around the ECB’s 2% target, reinforcing expectations that the central bank will leave rates unchanged on Thursday.
Source: Fxstreet
