EUR/USD Soars, U.S. Yields Plummet and Dollar Follows Suit After Fed Decision
Alex Boltyan | Feb 01, 2023 04:16PM ET
The EUR/USD pair jumped to a fresh 10-month high at 1.1000 after the Federal Reserve decided to raise the target range for the federal funds rate by 25 basis points to 4.5%-4.75% as expected.
At a press conference, Fed’s Chair Jerome Powell stated that for the first time, the Fed can say that the disinflationary process has begun, but that “is not grounds for complacency.” Furthermore, Powell noted that additional rate hikes will be appropriate and reiterated that the Fed is fully committed to bringing inflation back down to the 2% long-term target.
He welcomed the decelerating readings regarding the latest inflation data but added that the FOMC members need more evidence. He focused on the risk of inflation expectations becoming unanchored, stating that it will threaten price stability and that it is still too early to declare victory.
Even so, market participants read the message as dovish, triggering a slump in U.S. Treasury bond yields and, therefore, a sell-off in the U.S. Dollar. At the time of writing, the EUR/USD trades at the 1.0990 area, recording a 1.2% daily gain after peaking at its highest level since April at 1.1001.
Across the pond, the Eurozone released lower-than-expected Harmonized Index of Consumer Prices data. The headline index grew 8.5% year-over-year in January, lower than the 9% expected and down from the 9.2% rate in December.
The core inflation was reported at 5.2%, unchanged from the previous month and slightly above expectations of 5.1%.
Investors’ attention shifts to Thursday’s European Central Bank (ECB) monetary policy decision. The European bank is expected to hike the main rates by 50 basis points.
In the aftermath, the EUR/USD pair holds a bullish bias as indicators on the daily chart gained momentum with the Fed-induced rally.
On the upside, immediate resistance levels are seen at 1.1000 and 1.1050, while support levels could be found at 1.0900, 1.0860, and the 20-day SMA at around 1.0813.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.