Following the recent Fed key interest rate decision, the EUR/USD currency pair is struggling to stabilize. As expected, the US central bank raised the key interest rate level late Wednesday evening and held out the prospect of a further rate hike.
While inflationary pressures are being cushioned, investors appreciate the Fed's clear course and monetary policy steadfastness. For the markets, this is the hoped-for anchor of stability in troubled waters. However, the joy over the Fed's recent communication could soon give way to a sober perspective. Even though optimists are currently gaining the upper hand, skeptics are likely to soon raise the question of how strongly the monetary policy headwind will pick up in the coming months.
EUR/USD
US Federal Reserve votes unanimously to raise key interest rate
„Our decision today was the right one,“ said Fed Chair Kevin Warsh late Wednesday evening after the US central bank meeting. Inflation is too high and has been for too long, it was stated. The Fed had raised the key interest rate by 0.25 percentage points to a range of 3.75 to 4.00 percent. The Fed members voted unanimously for the aforementioned step. Warsh pointed to persistently high inflation. In addition, the economy and labor market are robust enough to tighten monetary policy. According to the latest projections, the Fed now expects another rate hike by the end of 2026.
US consumer prices were most recently at 3.4 percent in August (compared to the same month of the previous year), thus remaining significantly above the medium-term target of 2.0 percent.
Next Wednesday, the initial estimates for purchasing managers from S&P Global for the Federal Republic of Germany will come into focus (09:30 AM), which are likely to provide economic momentum.
In the new trading week, the economic calendar suggests things could get particularly exciting on Thursday, notably with the planned summit between US President Donald Trump and Chinese head of state Xi. Chinese President and General Secretary Xi Jinping is expected in Washington on September 24. However, it was noted that official confirmation of the date from the Chinese side is still pending. Alongside trade issues, technological competition between the world's two largest economies is expected to be among the topics of discussion.
