Euro Weakens Amid Rising US Treasury Yields Ahead of Fed Decision
The Euro remains near its one-month low against the US Dollar as rising US Treasury yields boost the Greenback. The EUR/USD pair trades around 1.1543, holding close to its lowest levels in almost a month.
The US Treasury yields have climbed to fresh multi-year highs across the curve on Tuesday, with the benchmark 10-year yield reaching 5.04%, its highest level since 2007. The bond sell-off has been driven by the energy shock stemming from the war in the Middle East, with oil prices adding to inflationary pressures and strengthening the case for tighter monetary policy.
The European Central Bank (ECB) has already raised interest rates twice this year, taking the deposit facility rate to 2.50%, and has signalled openness to additional tightening. Attention now turns to the Federal Reserve (Fed), with markets widely expecting a 25-basis-point increase on Wednesday.
A surprise hold by the Fed could trigger a sharp pullback in the US Dollar and Treasury yields, allowing EUR/USD to extend its rebound. Conversely, a rate hike accompanied by hawkish economic projections and comments from Fed Chairman Kevin Warsh could trigger fresh selling in EUR/USD.