EUR/USD rises to near 1.0900 in North American trading hours on Monday. The major currency pair gains as the US Dollar (USD) drops as investors turn cautious ahead of the Federal Reserve’s (Fed) interest rate decision, which will be announced on Wednesday. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, falls to near 103.50.
The Fed is almost certain to keep interest rates steady in the current range of 4.25%-4.50%. Therefore, the US Dollar’s (USD) outlook will be guided by the Fed’s dot plot, which shows where officials see interest rates heading in the near and longer term, as well as the growth, employment, and inflation outlook in the Summary of Economic Projections (SEP). In the December meeting, Fed policymakers anticipated two interest rate cuts this year.
Investors will also focus on Fed Chair Jerome Powell’s remarks on the US economic outlook in the press conference following the monetary policy decision. A slew of US officials, including President Donald Trump, have stated that tariff policies could lead to some economic shocks in the near term. On Sunday, US Treasury Secretary Scott Bessent said in an interview with NBC News, “I can predict that we are putting in robust policies that will be durable, and could there be an adjustment,” adding that the country needed to be weaned off of “massive government spending.” His comments came after the interviewer asked whether Trump’s agenda could lead the economy to a recession.
Last week, US Commerce Secretary Howard Lutnick said that policies by the President are the most important thing America has ever had, and “they worth it” after being asked whether it would be worth executing Trump’s policies even if they led to a recession. Market participants worry that Trump’s tariff policies could be inflationary and batter households’ consumption. Such a scenario bodes poorly for the US Dollar.
On the economic data front, the US Retail Sales data for February has come in weaker-than-expected. Retail Sales, a key measure of consumer spending rose by 0.2%, lower than estimates of 0.7%. In January, the consumer spending measure declined by 1.2%.
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.15% | -0.25% | 0.15% | -0.28% | -0.22% | -0.68% | -0.21% | |
EUR | 0.15% | -0.21% | -0.11% | -0.12% | -0.19% | -0.53% | -0.08% | |
GBP | 0.25% | 0.21% | 0.43% | -0.12% | 0.00% | -0.33% | 0.07% | |
JPY | -0.15% | 0.11% | -0.43% | -0.41% | -0.56% | -0.75% | -0.46% | |
CAD | 0.28% | 0.12% | 0.12% | 0.41% | -0.14% | -0.39% | -0.47% | |
AUD | 0.22% | 0.19% | -0.01% | 0.56% | 0.14% | -0.31% | 0.14% | |
NZD | 0.68% | 0.53% | 0.33% | 0.75% | 0.39% | 0.31% | 0.45% | |
CHF | 0.21% | 0.08% | -0.07% | 0.46% | 0.47% | -0.14% | -0.45% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
EUR/USD rises to near 1.0900 on Monday. The long-term outlook of the major currency pair remains firm as it holds above the 200-day Exponential Moving Average (EMA), which trades around 1.0655.
The pair strengthened after a decisive breakout above the December 6 high of 1.0630 last week.
The 14-day Relative Strength Index (RSI) wobbles near 70.00, suggesting the strong bullish momentum is intact.
Looking down, the December 6 high of 1.0630 will act as the major support zone for the pair. Conversely, the psychological level of 1.1000 will be a key barrier for the Euro bulls.
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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