EUR/USD holds positive ground near 1.1500 ahead of Fed rate decision

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  • EUR/USD gains traction to near 1.1500 in Wednesday’s Asian session. 

  • The Fed is likely to keep rates steady at the June meeting on Wednesday. 

  • The hawkish ECB bets support the Euro, but persistent Israel-Iran tensions might cap its upside. 

The EUR/USD pair attracts some buyers to around 1.1500 during the Asian trading hours on Wednesday. A slew of downbeat US economic data weigh on the Greenback. However, escalating Israel-Iran tensions might cap the upside for the major pair. The US Federal Reserve (Fed) rate decision will be closely watched later on Wednesday. 

Eroding confidence in the US economy amid trade policies undermines the US Dollar (USD) against the Euro (EUR). Data released by the US Census Bureau on Tuesday revealed that Retail Sales in the United States fell by 0.9% MoM in May, compared to the 0.1% decrease (revised from +0.1%) recorded in April. This figure came in weaker than the estimations of -0.7%. Meanwhile, the US Industrial Production declined by 0.2% MoM in May versus 0.1% prior (revised from 0%), worse than the 0.1% expected. 

Traders expect the US Fed to leave borrowing costs unchanged at its June meeting on Wednesday. The markets are now pricing in nearly 80% odds of a Fed rate cut in September, followed by another one in October, according to Reuters. 

"In the very near term a cautious message will probably be reemphasised, but what will be interesting is how they interpret and navigate the new forecast, which we think will show a lower growth path alongside potentially stickier inflation," said currency strategist Rodrigo Catril at National Australia Bank.

The hawkish tone from the European Central Bank (ECB) policymakers supports the shared currency. ECB President Christine Lagarde said that rate reductions are coming to an end as the central bank is now “in a good position” to deal with prevailing uncertainties. 

Meanwhile, investors will keep an eye on geopolitical risks. Israel is set to intensify its attacks on Tehran, while the US is considering expanding its role amid rising tensions between Israel and Iran. Any signs of escalation could boost the safe-haven flows, benefiting the Greenback. 

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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