All eyes on the Fed – Commerzbank

There was a lot of data released on Tuesday, but it did not seem to have much of an impact on the EUR/USD exchange rate, Commerzbank’s FX analyst Volkmar Baur notes

All eye on the Federal Reserve meeting

“Although the euro zone economy grew slightly more than expected in the second quarter and inflation in Spain was lower than expected, the picture in the euro area's largest economy was just the opposite. Growth was weaker and inflation was slightly higher than expected. In the end, after more US job openings were reported, the US-dollar managed to gain some ground against the Euro (EUR).”

“All in all, though, this was just the prelude to tonight. At 7:00 p.m. (GMT+1), the Fed will announce its interest rate decision, and that is where the focus of forex traders will be. The market is pricing in only a minimal chance of a rate cut today, but is absolutely certain of a rate cut in September. A little more than two and a half rate cuts are expected by the end of the year, which seems quite realistic.”

“So, while we are all waiting for the Fed tonight, it could be that in the end not much will change. I expect rates to remain unchanged, but that a first cut (in September) will be verbally prepared. In that case, the market's assessment is unlikely to change much, which is why attention will turn to the labor market on Friday.”

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