EUR/USD Exchange Rate Stalls Ahead of Fed Policy Decision
The Euro US Dollar (EUR/USD) exchange rate is trading in a neutral range this morning as markets remain wary ahead of the Federal Reserve’s latest rate decision.
At the time of writing the EUR/USD exchange rate is currently trading at $1.1354, virtually unchanged from today’s opening rate.
Dovish Fed to Drive the US Dollar (USD) Lower?
The US Dollar (USD) looks poised to tumble against the Euro (EUR) and the majority of its other peers this week on expectations of a dovish rate decision by the Federal Reserve
This comes following a flurry of cautious remarks from Fed Chair Jerome Powell earlier in the year and recent signs of a slowing US economy, which has markets speculating Fed policymakers will revise their policy plans this month.
Economists forecast this is likely to involve the bank altering its ‘dot plot’ and ditching its previous plans to raise interest rates twice this year.
James Knightley, Chief International Economist at ING suggests:
‘Having hiked interest rates four times in 2018, the Federal Reserve has adopted a more dovish position since the start of 2019. Recent data has been somewhat mixed, so with inflation described as ‘muted’ the central bank can be ‘patient’ with regards to the timing of when to react with any policy change.
‘We would expect all of these words and phrases to get a mention in either the press release or the accompanying press conference on Wednesday… Rather than signalling two rate rises this year and one in 2020, we think they will opt for just one hike in 2019 with one more in 2020.’
Euro (EUR) Exchange Rates Steady as Eurozone Sentiment Improves
Meanwhile, the Euro (EUR) is stable this morning as Eurozone economic sentiment was shown to have improved this month.
According to the latest ZEW economic sentiment index, economists in the Eurozone appeared to have found some renewed confidence in the bloc this month after the index unexpectedly climbed from -16.6 to -2.5.
While this shows that pessimists still outweighed optimists this month, it indicates that economists may believe that the recent slowdown in the Eurozone may be over the hump and that growth may begin to accelerate again in the coming months.
EUR/USD Exchange Rate Forecast: Rebound in US Factory Orders to Support the US Dollar?
Looking ahead, while the spotlight is likely to remain on the Fed’s upcoming rate decision the Euro US Dollar (EUR/USD) exchange rate could see some interim movement following the release of the latest US factory order figures.
Economists forecast that order growth will have rebounded from -0.6% to 0.3% in January, potentially prompting some modest gains in the US Dollar.
Meanwhile the focus for EUR investors is likely to now turn towards the release of the Eurozone’s latest PMI figures at the end of week, with another lacklustre growth report from the bloc’s private sector likely to reignite concerns of a slowdown in the Eurozone and dampen the appeal of the single currency.