The EUR/USD currency pair is experiencing continued losses for a second consecutive day, primarily driven by a strengthening US Dollar. The US Dollar Index, which measures the Greenback against a basket of six major currencies, has rebounded to approximately 97.50 after hitting fresh year-to-date lows at 96.22 shortly after the Federal Reserve’s recent interest rate decision.
On Thursday, the Euro trades under pressure against the US Dollar, with EUR/USD currently hovering around 1.1784, reflecting a decrease of nearly 0.25% for the day. The renewed strength of the US Dollar follows the Federal Reserve’s reduction of its benchmark interest rate by 25 basis points, bringing it down to a range of 4.00%-4.25%. Despite being a widely anticipated move, the market quickly pivoted its focus to updated economic projections and remarks made by Fed Chair Jerome Powell during a press conference.
The recent Fed rate cut was the first since December and has resulted in a downward shift in the median interest rate projections for 2025, suggesting an additional easing of around 50 basis points by the end of the year. This would place rates in the target range of 3.50-3.75%. However, not all Federal Reserve officials are in agreement, with a significant minority indicating that there may only be one or no further cuts. Projections were also revised lower for 2026 and 2027, stabilizing at 3.0% in the long term.
During the press conference, Powell characterized the move as a “risk management cut.” He emphasized that monetary policy decisions would be made on a “meeting by meeting” basis, reflecting changes in economic conditions. Powell pointed out that while employment trends are softer, inflation remains a persistent concern, reinforcing the Fed’s commitment to achieving a 2% inflation target. His cautious tone helped the US Dollar regain ground as investors recalibrated their expectations regarding the pace of future rate cuts.
Adding to the US Dollar’s momentum, Thursday’s economic releases showcased better-than-anticipated results. Initial Jobless Claims for the week ending September 13 dropped to 231,000, surpassing the expected 240,000. Moreover, the Philadelphia Fed Manufacturing Survey for September saw a significant increase, soaring to 23.2, a stark rise from the expected 2.3 and a rebound from the previous month’s figure of -0.3.
In the currency markets, the US Dollar demonstrated notable strength, particularly against the New Zealand Dollar, with significant percentage changes against other major currencies as well. The table illustrates variations in the US Dollar’s performance relative to the Euro, British Pound, Japanese Yen, Canadian Dollar, Australian Dollar, and Swiss Franc. Overall, these trends underscore the USD’s resilience in light of recent economic data and the Fed’s monetary policy stance.
