Hawkish Fed Sends EUR/USD Plummeting to Multi-Month Lows

The Federal Reserve's unanimous decision to raise interest rates has sent shockwaves through financial markets, particularly affecting the euro. The EUR/USD pair broke down to multi-month lows as a result of the hawkish hike.

Fed officials, including Chairman Kevin Warsh, delivered an unmistakably hawkish message at the September meeting. They upgraded economic growth projections for this year and next while also predicting lower unemployment rates. However, the FOMC's median dot plot path was not as aggressive as market expectations had priced in.

The reaction in US rates was expected, with yields surging across the curve. The front-end took the brunt of the impact, leading to a sharp bear flattening of the Treasury curve. This, in turn, contributed to the strengthening of the US dollar against major currencies like the euro.