The EUR/USD currency pair has dipped to around 1.0370 during Thursday’s trading in Asia, following a recent decision by the Federal Reserve to decrease its federal funds rate. The Fed’s cut of 25 basis points has lowered the target range to between 4.25% and 4.50%. This development, combined with dovish signals from the European Central Bank (ECB), is weighing on the EURO , resulting in a weaker performance for the pair.
The Fed’s decision, which was largely anticipated, marked a significant shift, reflecting a more cautious stance moving into the following year. The latest Economic Projections indicate that while the Fed plans to cut rates, the envisioned reduction has been adjusted; now, only two cuts are projected for 2025 compared to the previous expectation of four. Federal Reserve Chair Jerome Powell emphasized the central bank’s intent to proceed carefully with further cuts, highlighting persistent inflation that remains above the target of 2%. This more cautious outlook has bolstered the strength of the US Dollar against its European counterpart.
On the other side of the Atlantic, there is increasing speculation that the ECB may continue to lower interest rates at each of its meetings through June 2025. Such fears arise from rising economic uncertainties within the Eurozone, compelling policymakers to take aggressive action. As expectations for more substantial rate cuts from the ECB grow, this could place additional downward pressure on the EURO .
Market watchers are also awaiting key economic data releases later today, including US weekly Initial Jobless Claims, Existing Home Sales, and the final reading for the Gross Domestic Product Annualized for the third quarter. These figures are likely to influence market sentiment and provide further insights into the current economic climate.
