EUR/USD trims early gains after Fed dot plot shifts away from rate cuts, Fiber falls from 1.0850
12.06.2024, 18:13

EUR/USD trims early gains after Fed dot plot shifts away from rate cuts, Fiber falls from 1.0850

  • EUR/USD pulls back from 1.0850 after Fed holds rates; rate cuts look less likely.
  • Fed dot plot sees less likelihood of rate cuts in 2024.
  • Fed's forward-looking rate expectations tick higher.

EUR/USD pivoted away from 1.0850 on Wednesday after the Federal Reserve (Fed) held rates as markets broadly expected, but a shift in the Fed's "dot plot" of interest rate expectations is warning that interest rates are likely to continue holding higher for longer

Fed leaves policy rate unchanged at 5.25%-5.5% as forecast

The Fed's interest rate outlook sees higher rates than previously expected, with the 1-year rate outlook rising to 4.1% from the previous 3.9%. The 2-year rate outlook held steady at 3.1%, and the long-term interest rate outlook rose to 2.8% from 2.6%.

Live Coverage: Fed dot plot cools Gold, stocks, buoys US Dollar

According to the Fed's dot plot, only a single rate cut in 2024 is looking more likely. Four members of the Federal Open Market Committee (FOMC) see no rate cuts at all in 2024, with seven FOMC members expecting only a single quarter-point cut. Eight FOMC voters still see two cuts for the year, but the summary of FOMC rate expectations has shifted firmly back from previous forecasts.

EUR/USD rallied hard early Wednesday after US Consumer Price Index (CPI) inflation cooled faster than expected in May. The Fiber rose 1.10% to 1.0850 after May's US CPI eased to 0.0% MoM, down from the forecast 0.1% and easing further from the previous 0.3%. However, an uneasy Fed has trimmed bullish momentum, and the pair is dropping back post-FOMC as investors await Fed Chair Jerome Powell's press conference at the bottom of the hour.

more to come...

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