Calm Before the Storm? Euro to US Dollar (EUR/USD) Exchange Rate Tight Ahead of Fed Rate Decision

Limited EUR/USD Exchange Rate Movement ahead of Federal Reserve Meeting

The Euro (EUR) is trading in a narrow range against the US Dollar (USD) today, ahead of this evening’s Federal Reserve interest rate decision.

The US central bank’s decision could push the US Dollar up against the Euro, so EUR traders are waiting to see what comes of the Fed meeting.

There has been little domestic support for the Euro today, with French consumer confidence in September falling to its lowest level since April 2016.

US Dollar to Euro (USD/EUR) Exchange Rate Steady before Fed Rate Decision

Like the Euro (EUR), the US Dollar (USD) has seen limited movement today on tensions about this evening’s Fed rate decision.

On the home front, US Dollar traders have also held off from trading the currency because of Tuesday’s noteworthy UN General Assembly meeting.

President Donald Trump made his second appearance at the meeting, and used the venue to make a case against globalism, which has been interpreted by markets as meaning there might be additional trade clashes in the future.

Euro to US Dollar Exchange Rate Forecast: Fed Interest Rate Decision in the Spotlight

Fed policymakers are widely expected to hike interest rates from 2% to 2.25% when they meet this evening. While such a decision has been priced in by markets for some time, the US Dollar could still rally against the Euro on the news.

Outside of a potential Fed rate hike, the US central bank could also support a USD/EUR exchange rate rise with its economic projections.

If the Fed predicts continued US economic growth and conditions that can accommodate more interest rate hikes then the US Dollar could extend any existing gains.

For context, USD traders are expecting a total of four interest rate hikes in 2018 and a rate increase this evening would make three hikes so far this year.

Thursday Outlook: Will EUR/USD Exchange Rate Fall on Confidence Data?

In terms of the Euro, the next economic news to watch out for will be Thursday morning’s spread of Eurozone confidence measures.

Unfortunately for Euro investors, if the single currency is reeling from a Fed interest rate hike this evening it could fall further if the confidence stats print as expected.

Current expectations are for a reduction in confidence levels across the board in September, with lower business confidence, services sentiment and economic sentiment being forecast.

Lower levels of confidence may translate to a slump in business investment and consumer spending, both of which could lead to a drop in Eurozone GDP.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon