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Euro holds near one-month low against US Dollar ahead of Fed verdict

  • EUR/USD stays defensive as markets prepare for the Fed’s first rate hike since 2023.
  • The US Dollar holds near a two-week high, supported by elevated Treasury yields.
  • The Fed’s economic projections and Kevin Warsh’s remarks could drive the pair’s next move.

EUR/USD remains on the back foot on Tuesday as rising US Treasury yields support the US Dollar. However, the pair lacks strong follow-through selling as traders avoid placing large bets ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

At the time of writing, the pair trades around 1.1543 after touching an intraday low near 1.1527, holding close to its lowest levels in almost a month.

On the data front, second-tier US releases offered mixed signals and had little impact on the pair. The ADP Employment Change four-week average increased to 16.25K from 12.25K. Meanwhile, the New York Empire State Manufacturing Index fell to 7.6 in September from 20.6, missing the market forecast of 14.75.

US Treasury yields climbed to fresh multi-year highs across the curve on Tuesday. The benchmark 10-year yield reached 5.04%, its highest level since 2007, before easing back toward 5%.

The bond sell-off has been largely driven by the energy shock stemming from the war in the Middle East, with the Eurozone 10-year government bond yield also hitting a post-2009 high of 3.51%. Rising Oil prices are adding to inflationary pressures and strengthening the case for tighter monetary policy.

Against this backdrop, the European Central Bank (ECB) has already raised interest rates twice this year, taking the deposit facility rate to 2.50%, and has signalled openness to additional tightening.

Attention now turns to the Fed, with markets widely expecting the central bank to deliver its first rate hike since 2023 as the energy shock has stalled the disinflation trend, keeping inflation above the central bank's 2% target. According to the CME FedWatch Tool, traders price in around a 92% chance of a 25-basis-point (bps) increase on Wednesday.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.60, up 0.11% on the day and close to a two-week high.

With a quarter-point increase largely priced in, a surprise hold could trigger a sharp pullback in the US Dollar and Treasury yields, allowing EUR/USD to extend its rebound. Conversely, a rate hike accompanied by hawkish economic projections and comments from Fed Chairman Kevin Warsh could trigger fresh selling in EUR/USD.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD0.06%0.10%0.47%0.13%0.19%0.42%0.16%
EUR-0.06%0.05%0.39%0.06%0.11%0.35%0.10%
GBP-0.10%-0.05%0.36%-0.00%0.07%0.28%0.05%
JPY-0.47%-0.39%-0.36%-0.33%-0.27%-0.06%-0.30%
CAD-0.13%-0.06%0.00%0.33%0.07%0.28%0.03%
AUD-0.19%-0.11%-0.07%0.27%-0.07%0.23%-0.04%
NZD-0.42%-0.35%-0.28%0.06%-0.28%-0.23%-0.24%
CHF-0.16%-0.10%-0.05%0.30%-0.03%0.04%0.24%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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