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This scenario could weigh on EUR/ USD.Įuro Forecast - EUR/USD and EUR/GBP’s Path Tied to Fed and ECB Policy OutlookĪs for the European Central Bank, the institution spearheaded by Christine Lagarde is also seen delivering a quarter-point rate rise, but its guidance is unlikely to be hawkish. If Powell maintains an aggressive stance as part of a strategy to prevent financial conditions from easing significantly and to preserve optionality in case inflationary pressures reaccelerate later this year to the point where additional tightening is necessary, interest rate expectations could drift higher, boosting the U.S. This move is already fully discounted, so investors will focus primarily on the policy outlook for clues about the normalization campaign.

dollar, euro, and Japanese yen are likely to experience increased volatility, which could create attractive trading setups, but also carry more risks.įocusing first on the Federal Reserve, the rate-setting committee is forecast to raise borrowing costs by 25 basis points to 5.25%-5.50% after a brief pause. The Federal Reserve will be the first to do so on Wednesday, followed by the ECB on Thursday and the Bank of Japan on Friday.

Three of the world's most important central banks will announce their monetary policy decisions this week.

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