Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

EUR/USD posts modest gains, after Fed leaves interest rates unchanged

ForexJan 27, 2016 06:20PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
EUR/USD gained more than 0.20% on Wednesday to close at 1.0893.

Investing.com -- EUR/USD posted modest gains on Wednesday in a volatile day of trading after the Federal Reserve left short-term interest rates unchanged, one month after abandoning a seven-year zero interest rate policy with a historic rate hike.

The currency pair traded in a broad range between 1.079 and 1.0917, before settling at 1.0893, up 0.0031 or 0.29% on the session. The euro spiked to session-highs versus the dollar following the release, before falling back slightly at the close. With the gains, the euro finished with its third consecutive winning session against its American counterpart and closed at its highest level in more than a week. As the first month of the year draws near its completion, the euro is on pace to end January up slightly against the dollar – by approximately 0.40%.

EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.

Citing projections for weak economic growth and sluggish inflation expectations, the Fed as expected held its benchmark Federal Funds Rate at a level between 0.25 and 0.50%. While acknowledging that conditions in U.S. labor markets, along with household spending and business fixed income had improved in recent weeks, the FOMC blamed the recent slowdown in part on soft net export prices and the decline of inventory investment. As manufacturing production, retail spending and energy prices slumped dramatically in the fourth quarter, GDP growth for the period is expected to fall around 1%, substantially below previous estimates.

In one notable change, the FOMC removed a phrase that it is "reasonably confident" inflation will move toward its 2% objective from the statement. The minutes from the December FOMC meeting showed that the Fed does not expect long-term inflation to reach the target until 2018. The Core PCE Index, the Fed's preferred gauge on inflation, lingered around 1.3% in its latest reading last month.

"In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal," the FOMC said in the statement. "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate."

Analysts appeared divided on whether the statement indicates that the Fed could be leaning toward a subsequent rate hike in March or if the U.S. central bank could delay further tightening measures beyond the first quarter. The decision, according to the Fed's statement, will hinge on evolving labor market conditions, inflation expectations and developments in the global financial markets. Following the release, the CME Group's (O:CME) Fed Watch tool lowered the implied probability of a March rate hike to 27.7% from 30.3% earlier on Wednesday.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, settled at 99.03, down 0.05% on the day. The index remains near 12-month highs from December, when it eclipsed 100.00.

Investors await the release of January industrial and consumer data in the euro zone on Thursday for further signals of potential divergence between the Fed and the European Central Bank. Last week, ECB president Mario Draghi sent strong signals that the bank could approve a fresh round of stimulus measures when it meets again in March.

Yields on the U.S. 10-Year closed on Wednesday virtually flat at 2.003%. Minutes before the Fed's release, bond yields on U.S. 10-year Treasuries were at 2.043%, up four basis points on the session.

EUR/USD posts modest gains, after Fed leaves interest rates unchanged
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email