Euro gains for 6th straight day

The Euro is currently enjoying its 6th straight day of gains against the greenback after yesterday’s FOMC minutes revealed that US Federal reserve board members were divided on the need for any further interest rate hikes.

A majority of board members still advocate for one more hike but the minority against is growing and the chances for one last rate rise in November is now diminishing. The FOMC since March 2022 has raised its key interest rate 11 times, taking it to a targeted range of 5.25%-5.5%, the highest level in 22 years.

While there were conflicting opinions on the need for more policy tightening, there is one consensus and that is rates would need to stay higher for longer until policymakers are convinced inflation is heading back to 2%.

“A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted,” the summary of the Sept. 19-20 policy meeting stated.

Fed economists noted that the economy has proven more resilient than expected this year, but they cited a number of risks. The autoworkers’ strike, for one, was expected to slow growth “a bit” and possibly push up inflation, but only temporarily.

Looking further ahead today, the main driver of the EUR/USD currency pair will be the release of the latest consumer price index figures from the US which will be closely watched by market participants and is expected to show that monthly inflation slowed to 0.3% from 0.6%, while the annual rate eased to 3.6% from 3.7%.

This may be the deciding factor on whether the Fed actually deliver their final rate hike next month and bring to an end one of their most aggressive rate hiking cycles in recent times.