EUR/USD Tumbles on Hawkish Fed Outlook and Rebounding Oil Prices
The EUR/USD is on track for a weekly loss due to the Federal Reserve's hawkish policy outlook, which continues to support the US Dollar. The rebound in oil prices and US Treasury yields also puts pressure on the pair.
Crude prices fell earlier this week after Saudi Arabia increased efforts to reroute exports following an attack last week. However, supply risks in the Middle East remain high, keeping inflation risks skewed to the upside.
The West Texas Intermediate (WTI) oil price has recovered from a low of $94.63 and is currently trading around $97.20. This rebound has pushed Treasury yields higher, with the 10-year benchmark yield trading at 4.98%, close to its multi-year high of 5.04%.
The Fed's decision to raise the federal funds rate by 25 basis points to 3.75%-4.00% on Wednesday was met with expectations of additional tightening. The updated dot plot shows that 16 out of 18 officials expect at least one more increase this year, reinforcing the prospect of higher borrowing costs.
The US Dollar Index (DXY) has surpassed its seven-week high, trading above 100.50. Market participants see a 55% probability of another 25-basis-point Fed rate hike in October, according to the CME FedWatch Tool.