EURUSD → Quiet before FOMC

20. Sept. 2023

EURUSD saw little volatility on Tuesday, moving around the flatline and oscillating between small gains and losses, with market participants refraining from making large directional bets ahead of a major risk event: the FOMC announcement.

The Federal Reserve is set to unveil its September decision on Wednesday, following a two-day meeting. While no changes to monetary policy are anticipated, officials will release the eagerly awaited 'Summary of Economic Projections,' which incorporates the influential dot-plot.

Forex traders holding positions in EUR/USD or any other currency pairs involving the U.S. dollar should closely monitor two critical aspects: the ultimate destination for the Federal funds rate and the easing measures being contemplated for 2024.

20. Sept. 2023

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FOMC MEETING PROBABILITIES


FED TERMINAL RATE
In its June projection material, the U.S. central bank conveyed that borrowing costs would reach 5.625% by year-end (median estimate), a level that would imply one additional quarter-point hike from the current stance.

The prevailing sentiment among investors is that the tightening campaign has ended. Therefore, any signals reinforcing a renewed commitment to further tightening could trigger a hawkish repricing of interest rate expectations, sending U.S. Treasury yields higher and EUR/USD lower.