EUR/USD Tumbles on Fed Rate Hike, Dollar Strength Continues
The EUR/USD exchange rate fell by 0.61% on September 16, reaching $1.1472. This decline was largely driven by a surge in demand for the US dollar following the Federal Reserve's decision to raise interest rates.
The Fed increased the federal funds target range to 3.75%-4.00%, marking its first policy rate hike since July 2023. The updated dot plot and Summary of Economic Projections indicated that another rate hike is likely before year-end, due to sticky core inflation and elevated energy prices.
The hawkish policy stance led to a sharp repricing across fixed-income markets, causing US Treasury yields to rise. This, combined with surging crude oil prices driven by geopolitical tensions in the Middle East, bolstered US inflation expectations while dampening global risk appetite.