EUR/USD Takes a Beating as Hawkish Fed Hikes Interest Rates

The Federal Reserve's recent rate hike has sent shockwaves through financial markets, with the EUR/USD currency pair hitting multi-month lows.

The unanimous decision by the Fed to raise interest rates for the first time in over three years was seen as hawkish, validating market expectations of stronger growth and higher inflation. The updated economic projections showed improved forecasts for both this year and next, as well as lower unemployment.

Fed officials, including President Kevin Warsh, emphasized that current policy is not restrictive enough to combat rising prices, suggesting further rate hikes may be necessary. The reaction in US rates was immediate, with yields surging across the curve, led by the front end. The sharp bear flattening of the Treasury curve has left investors on edge.

The EUR/USD pair's technical picture is deteriorating sharply, and key levels to watch are the 1.1480 support level and the former downtrend resistance around 1.1420. A breach of either could lead to a deeper unwind towards support at 1.1200 or even lower.