- EUR/USD is on the defensive, courtesy of dovish ECB
- Markets have priced in at least two Fed rate cuts for 2019.
- Fed will have a hard time beating market expectations.
EUR/USD will likely trade on the defensive ahead of the Fed, courtesy of rising odds of rate cuts by the European Central Bank (ECB).
The ECB President Mario Draghi hinted at more stimulus on Tuesday, sending the EUR lower across the board.
Notably, the money markets have pulled forward expectations of a 10 basis point rate cut to December from March 2020 seen last week. Further, markets are now also pricing 15 basis point rate cut by June 2020.
As a result, the EUR/USD pair could find acceptance below 1.1180 (Tuesday's low) ahead of the US Federal Open Market Committee (FOMC) rate decision due at 18:00 GMT today. As of writing, the pair is trading at 1.1192, having hit a high of 1.1202 in the Asian session.
Focus on FOMC
The US Federal Reserve is expected to keep rates unchanged today and lay the groundwork for a rate cut later this year. The market is fully pricing in two 25bps rate cuts by the end of the December FOMC meeting and a 50% chance of a third, according to Reuters.
With two rate cuts already priced in, the Fed is going to have a hard time beating market expectations. Moreover, with the US stock markets near record highs, the Fed has little room to sound exceedingly dovish.
Add to that the rising odds of ECB rate cuts and the EUR/USD pair looks set for a deeper drop.
That said, a minor bounce could be seen if the Fed does signal two rate cuts by the year-end. However, a bullish reversal in EUR/USD would be confirmed only above the recent high of 1.1348.
Pivot levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays around 1.0300 ahead of FOMC Minutes
EUR/USD stays under heavy selling pressure and trades around 1.0300 on Wednesday. News of US President-elect Donald Trump planning to declare an economic emergency to allow for a new tariff plan weighs on risk mood. US ADP misses expectations with 122K vs 140 anticipated.
GBP/USD drops to fresh multi-month lows, hovers around 1.2350
GBP/USD remains on the back foot and trades at its weakest level since April, around 1.2350. The risk-averse market atmosphere on growing concerns over an aggressive tariff policy by President-elect Donald Trump drags the pair lower as focus shifts to US FOMC Minutes.
Gold pressures fresh multi-week highs
Gold price (XAU/USD) advances modestly in a risk-averse environment. The benchmark 10-year US Treasury bond yield holds at its highest level since late April near 4.7%, making it difficult for XAU/USD ahead of FOMC Minutes.
Fed Minutes Preview: Key Insights on December rate cut and future policy plans
The Minutes of the Fed’s December 17-18 policy meeting will be published on Wednesday. Details surrounding the discussions on the decision to trim interest rates by 25 basis points will be scrutinized by investors.
Bitcoin edges below $96,000, wiping over leveraged traders
Bitcoin's price continues to edge lower, trading below the $96,000 level on Wednesday after declining more than 5% the previous day. The recent price decline has triggered a wave of liquidations across the crypto market, resulting in $694.11 million in total liquidations in the last 24 hours.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.