EURUSD plunged after the US Fed January meeting.
The major currency pair is weakening on Thursday. the current quote for the instrument is 1.1190.
During its January meeting, the US Fed left the benchmark interest rate unchanged at 0.25%, just as expected. The QE tapering pace also remained the same and the programme will be closed in March. The regulator said that it was going to raise the rate in the future and would be ready to adjust its monetary policy if the need arose.
The Fed Chairman Jerome Powell said that the country’s economy was demonstrating very serious improvement, but the Omikron strain would surely interfere. However, this wave is expected to retreat quite quickly. The labour market is looking strong and stable, the demand for a workforce remains high. Inflation is still rather high but could drop over the course of 2022.
According to the Fed, the economy no longer requires massive support from the monetary policy. The regulator is planning to reduce its balance sheet right after the first rate hike.
So, the Fed’s comments were rather “hawkish” and now investors believe the first hike to be in March, +50 basis points, and then in May, June, July, and December, +25 basis point each time. Powell didn’t deny the possibility of acceleration in the rate in the nearest future and that was exactly what market players wanted to hear. Of course, there is a more conservative scenario, which implies +25 basis points in March and then one hike per quarter until mid-2023.
The Fed’s “hawkish” stance provided the “greenback” with much support.
Source: Roboforex
