Fed Decision Looms Large Over EUR/USD Exchange Rate as Markets Price in September Hike

The EUR/USD exchange rate has held steady at around 1.16 despite recent volatility in US Treasury yields, which have jumped to near 5% for the first time in over three years.

This increased uncertainty is now focused on this week's Federal Reserve meeting, where a September rate hike is increasingly expected. However, the question remains whether the Fed can ultimately deliver the tightening cycle already priced into markets.

A recent survey shows that markets are pricing in close to a 70% chance of a rate hike at this week's meeting, with some analysts predicting three rate increases by March 2027.