Euro awaits Fed minutes meeting

During today’s trading session the US Federal Reserve will release the latest monetary policy meeting minutes of the Federal Open Market Committee (FOMC) by traders of the EUR/USD currency pair as they would provide insight into the US central bank’s forward path.

On June 13-14, the US Federal Reserve, after raising 500 basis points (bps), decided to keep the Federal Funds Rates (FFR) unchanged at 5.00%-5.25%, as policymakers would like to assess the impact of the cumulative tightening in the economy, which according to the latest round of data, remains resilient.

The Fed’s June meeting witnessed the release of the Summary of Economic Projections (SEP), used by Fed officials to guide the market regarding how they see economic growth, inflation, unemployment, and the FFR. It should be said that twelve of the eighteen Federal Reserve Open Market Committee (FOMC) members expect rates to peak at 5.6%, implying that Fed Chair Jerome Powell and Company foresee two additional rate hikes.

That helped the greenback, which initially witnessed weakness, though the Fed’s hawkish hold limited its losses. OF note, Fed Chair Jerome Powell stuck to the 50 bps of tightening pending to be raised at his public appearances while downplaying a recessionary scenario and emphasizing the tightness of the labour market.

Despite that, money market futures estimate the Federal Reserve would hike just once, as shown by the CME FedWatch Tool, with odds above 85%.

It should be said postures within the Federal Reserve had begun to change, as some hawks are worried about overtightening, like the case of Atlanta’s Fed President Raphael Bostic, who shifted dovish. Nevertheless, most US central bank officials estimate that further monetary firming is needed to tackle inflation at twice the Fed’s 2% goal.

After the FOMC’s June minutes, upcoming US Nonfarm Payrolls data and inflation figures would help the Fed to figure out the next move at the July 25-26 FOMC meeting.

Given that the EUR/USD is trading with a bearish tone in the week, if the FOMC’s minutes area tilted hawkish could motivate EUR/USD sellers to decisively break support at the 50-day Exponential Moving Average (EMA) at 1.0857 and exacerbate a test of the 1.0800 mark. Nonetheless, the EUR/USD will need to hurdle the 100-day EMA at 1.0806 before cracking the 1.0800 figure as US Dollar (USD) bulls eye the 200-day EMA at 1.0722.

Conversely, worse-than-expected Eurozone (EU) growth data and PMI flashing a recession might prevent the European Central Bank (ECB) from hiking twice toward the September meeting. But as ECB officials remained hawkish, any dovish signal by the Fed could pave the way for EUR/USD to reclaim the 1.0900 figure, ahead of challenging 1.1000.