EUR/USD Range Trade Ahead as Fed Decision Looms

Chris Turner at ING is predicting that EUR/USD will remain in a tight range for the next few weeks, trading between 1.14 and 1.15. This is because the pair was constrained by higher long-dated US yields and pressure on US growth stocks after the Federal Reserve's (Fed) recent decision. The Fed is expected to stay on hold in September.

The modest bounce of EUR/USD after the FOMC press conference was limited due to a drop in short-dated US real yields, which was offset by the sell-off in long-dated US rates and pressure on growth stocks in the S&P 500. The Fed's decision is a close call due to high energy prices and a strong US economy.

The key driver of EUR/USD's movement over the short term will be Eurozone GDP and inflation data, particularly today's releases for second quarter GDP prints and July inflation indications. Weak growth in the eurozone may not prevent an ECB hike in September, which is more than 90% priced. An uptick in July inflation data today could keep short-dated euro rates supported.