EUR/USD Tumbles Below 1.15 on Fed Rate Hike and 2026 Interest Rate Signal
The EUR/USD exchange rate fell below 1.15 after the Federal Reserve's interest rate hike and its signal that another increase is possible in 2026.
The Fed raised rates by 25 basis points to a range of 3.75-4.00%, with projections indicating a median year-end federal funds rate of 4.1% for both 2026 and 2027, up from 3.8% and 3.6% in June.
The European Central Bank also tightened its monetary policy by raising its deposit rate to 2.50%, but the EUR/USD pair fell anyway due to the larger interest rate differential between the two regions.
According to Carol Kong, a Commonwealth Bank currency strategist, the Fed may be catching up to inflation rather than starting a long-term tightening cycle, and softer U.S. inflation or employment data could remove the expectation of another hike in 2026.