- EUR/USD is gaining 0.28% in the Wednesday session.
- The Federal Reserve raised 50 bps for the first time in 2022.
- EUR/USD hovered around 1.0535-1.0575 at the time of writing.
The EUR/USD it recovered when the Federal Reserve decided to raise rates by 50 bps and also announced the start of its Quantitative Tightening (QT) program. At the time of writing, EUR/USD is trading at 1.0554, 0.34% higher on the day, as traders prepare for the Fed’s Jerome Powell press conference.
Key Observations from the FOMC Monetary Policy Statement
The Federal Open Market Committee said inflation remains elevated, reflecting supply-demand imbalances related to the pandemic. The committee stressed that inflation is expected “to return to its 2% target and the labor market to remain strong with appropriate tightening of monetary policy.” The US central bank reiterated that they would remain “attentive to inflation risks.”
The Fed acknowledged the negative first-quarter GDP figure, saying “household spending and business fixed investment remained strong.”
Regarding the problems of the war between Ukraine and Russia, the Fed said that “it is causing tremendous human and economic difficulties.” They further added that “the implications for the US economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.”
They also announced the balance sheet write-down on June 1. Initially, they will cap US Treasury bonds at $30 billion per month. As for agency debt and mortgage-backed securities (MBS), the Fed will cut it by $17.5 billion per month. In both cases, the cap will be lifted after three months, as the US Treasury bond drawdown will reach $60bn, while the MBS cap will rise to $30bn.
EUR/USD Headline Reaction
EUR/USD fell towards 1.0530, then rallied sharply towards 1.0573, followed by a pullback to current levels around 1.0553 as market players prepare for Federal Reserve Chairman Jerome Powell’s press conference.
Technical levels
Source: Fx Street
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