The EUR/USD pair jumped to a fresh 10-month high at 1.1000 after the Federal Reserve decided to raise the target range for the federal funds rate by 25 basis points to 4.5%-4.75% as expected.
At a press conference, Fed’s Chair Jerome Powell stated that for the first time, the Fed can say that the disinflationary process has begun, but that “is not grounds for complacency.” Furthermore, Powell noted that additional rate hikes will be appropriate and reiterated that the Fed is fully committed to bringing inflation back down to the 2% long-term target.
He welcomed the decelerating readings regarding the latest inflation data but added that the FOMC members need more evidence. He focused on the risk of inflation expectations becoming unanchored, stating that it will threaten price stability and that it is still too early to declare victory.
Even so, market participants read the message as dovish, triggering a slump in U.S. Treasury bond yields and, therefore, a sell-off in the U.S. Dollar. At the time of writing, the EUR/USD trades at the 1.0990 area, recording a 1.2% daily gain after peaking at its highest level since April at 1.1001.
Across the pond, the Eurozone released lower-than-expected Harmonized Index of Consumer Prices data. The headline index grew 8.5% year-over-year in January, lower than the 9% expected and down from the 9.2% rate in December.
The core inflation was reported at 5.2%, unchanged from the previous month and slightly above expectations of 5.1%.
Investors’ attention shifts to Thursday’s European Central Bank (ECB) monetary policy decision. The European bank is expected to hike the main rates by 50 basis points.
In the aftermath, the EUR/USD pair holds a bullish bias as indicators on the daily chart gained momentum with the Fed-induced rally.
On the upside, immediate resistance levels are seen at 1.1000 and 1.1050, while support levels could be found at 1.0900, 1.0860, and the 20-day SMA at around 1.0813.