EUR/USD: Fed meeting will not leave the pair trading very far from 1.0650/1.0700 – ING

EUR/USD enjoyed a short-lived rally on Tuesday. Economists at ING analyze the pair’s outlook ahead of the FOMC meeting.

EUR/USD might slip back to 1.0600 in a hawkish Fed surprise scenario

Markets are probably holding on to their Dollar positions ahead of a likely hawkish hold by the Fed – and risks of 2024 dot plot revisions – meaning that the pair may be capped into this evening’s risk event.

The divergence between a dovish hold in the Eurozone and a hawkish hold in the US should continue to thwart EUR/USD rebound possibilities, but our base case is that today’s meeting will not leave the pair trading very far from 1.0650/1.0700. 

A 2024 dot plot upward revision and a more hawkish than expected outcome throughout should see it slip back below 1.0600. 

Ultimately, US data should be back in the driver’s seat in no time.

See – Fed Preview: Forecasts from 15 major banks, a pause, but the end of rate hikes?