- The US Federal Reserve has raised interest rates by 75 basis points.
- The central bank acknowledged that spending and production “smoothed”.
- EUR/USD – Initially reacted to the upside but is now hovering around 1.0105-50.
The EUR/USD rose after the US Federal Reserve decided to raise interest rates by 75 basis points, raising the Federal Funds Rate (FFR) to the 2.25-2.50% range, as the US central bank recognized that production and spending “have smoothed out.” The pair first rose to 1.0153 but then fell to around 1.0105.
FOMC Monetary Policy Statement Summary
Fed officials, in their statement, acknowledged that the labor market is robust. However, they did mention that output and spending had taken a toll due to the rate hike, which was perceived as slightly dovish by traders’ reaction.
On inflation, the central bank said inflation remains elevated and had widened further, while blaming the war between Russia and Ukraine for creating additional upward pressure on inflation. Therefore, in reaction to this, the Federal Reserve raised rates and anticipated that “continued increases in the target range will be appropriate.” In addition, the Fed reiterated that it is “firmly committed to returning inflation to its 2 percent target.”
In the meantime, the Fed will continue to shrink its balance sheet, as envisioned in the Fed’s Balance Sheet Reduction Plans, published in May.
EUR/USD Market reaction
EUR/USD reacted higher before settling around current price levels, with an eye on Fed Chairman Jerome Powell’s conference.
EUR/USD Technical Levels
Source: Fx Street
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