The Euro remains severely rangebound in today’s trading session as market participants, to afraid to enter trading positions, sit on the sidelines to await the latest interest rate decision from the US Federal reserve due out later today during the American trading session.
A 50-basis point rate hike by the Fed is widely priced into the market and we may see a relief rally for the Euro as traders but the rumor and sell the fact. On the other hand, some investors see an outside chance of a 75-point hike which would send the US dollar skyrocketing against the Euro as market participants pile into the greenback for the higher returns.
The following monetary statement by Fed president Jerome Powell after the interest rate decision will probably be more important than the rate hike itself as investors look for clues on the timing and size of any future rate hikes from the US central bank and how hawkish Powell will present himself
With inflation having surged to a 40-year high, the Fed has come under immense pressure to act aggressively to slow spending and reduce price spikes that are starting to have a drastic effect on households and companies.
As we can see on the chart, the EUR/USD currency pair has been stuck in a tight trading range for the past 5 trading session after previously falling around 500 pips in the last 2 weeks.
As mentioned earlier, today is all about the Fed rate decision and the amount of potential rate hikes moving forward and if we see Fed president Jerome Powell come out of the box with a hawkish tone regarding the US economy, we may see the Euro head towards a 20-year low.