- EUR/USD rose in response to the Fed’s first interest rate cut since March 2020.
- Fed unexpectedly cuts interest rates by 50 basis points at launch.
- Fed chart falls in September, unemployment forecast rises slightly.
EUR/USD rose to a fresh high in September after the Federal Reserve (Fed) surprised markets with a full 50 basis point rate cut on Wednesday, which boosted risk appetite and sent traders looking for a buy button. This is the first rate cut by the Fed in more than four years. Markets are back to square one after the Fed’s first rate cut of 2020, with Fiber settling at 1.1100.
The Fed’s scatter plot of the Federal Open Market Committee’s (FOMC) summary of economic projections was also revised down from the central bank’s previous interest rate forecasts. The Fed’s median policy expectation now calls for the federal funds rate to be 4.4% by the end of 2024 and 3.4% by the end of 2025, down from 5.1% and 4.1%, respectively.
Digging into the Fed notes, Fed policymakers are now forecasting U.S. gross domestic product (GDP) growth of an unchanged 2.0% through 2024, down from the previous print of 2.1% in June. Fed officials also expected the U.S. unemployment rate to stabilize at around 4.4% by the end of 2024.
Fed Chairman Jerome Powell did his best to tranquil markets during a press conference after the Fed cut interest rates by 50 basis points, emphasizing that the Fed would resume its wait-and-see approach to upcoming economic data in the coming weeks before deciding on further rate cuts. The Fed chairman’s measured approach to explaining the Fed’s policy adjustment has helped keep market flows in balance, with interest-rate markets pricing in a 65% chance of no further action at the FOMC’s next rate call on Nov. 7.
EUR/USD Price Forecast
Despite Wednesday’s Fed-led intraday rally, EUR/USD is still hovering near 1.1100. The Fed rally toward 1.1200 has reversed course in the low term, with Fiber recording a flat day in the midweek session. The pair continues to cycle on the paper chart at the high end of recent momentum, and low pressure will struggle to fully pull back to the 50-day exponential moving average (EMA) near 1.1000.
