Dollar Rallies After Hawkish Fed Decision, EUR/USD Eyes Key Support
The US dollar rallied across the board on Wednesday after the FOMC decision, which was seen as more hawkish than expected. The Fed hiked interest rates by 25 bps in an unanimous decision, removing a part that said inflation remained elevated due to supply shocks. The SEP showed upward revisions for growth and inflation, but downward revisions for unemployment.
The most significant aspect of the decision was the dot plot, which projected just one more rate hike in 2026, with rates staying higher throughout 2027 before rate cuts coming in 2028. This was less hawkish than market pricing, indicating that the Fed has a low appetite for an extended tightening cycle.
The focus is now on the Middle East and economic data. The US-Iran meeting yesterday was described as positive, but no timeline for a resolution was given. Trump mentioned another meeting would be scheduled soon.