Euro Maintains Gains Ahead of Fed Decision Amid Elevated Uncertainty
The Euro maintained its recent gains against a softer US Dollar as markets awaited the Federal Reserve's policy decision. The EUR/USD pair traded around 1.1390 in Asian hours on Wednesday, with investors focusing on the upcoming Fed announcement.
Despite the consensus that interest rates will remain unchanged, derivatives markets reflect an elevated level of uncertainty. Traders assigned a 30.5% probability to an immediate rate hike and a 76.6% chance of a move in September, suggesting expectations for US borrowing costs to stay restrictive.
The European Central Bank kept its key interest rate at 2.25% on July 23, while strongly hinting at a September hike after internal calls for an immediate increase. This guidance suggests that the ECB is preparing to tighten monetary policy in the near future.