The Euro plunged to its May lows. Overview for 17.06.2021

17.06.2021

EURUSD plummeted to its local lows after the June meeting of The US Fed was over.

The major currency pair plunged to its May lows after comments from the Fed. The current quote for the instrument is 1.1939.

After its June meeting, the American regulator kept the benchmark interest rate unchanged at 0-0.25%. The bond purchases will also remain at a rate of $120 billion a month. As it turned out, the intrigue was in the comments and forecasts that followed.  

For example, the regulator’s rhetoric changed in the matter of revising its monetary policy in the future. Now, it is expected that there might be two rate hikes before the end of 2023, this is the opinion of 11 out of 18 FOMC members. 7 out of 18 believe that the rate might go up as early as in 2022, while during the March meeting this number was 4. 

Also, the Fed revised its GDP growth forecasts for 2021. Now, the indicator is expected to add 7%. In 2022, the growth might reach 3.3%, the same as mentioned before. 

In the comments, the regulator said that the key thing that inspired optimism was the aggressive anti-coronavirus vaccination campaign, which significantly reduced the rate of spread of disease. At the same time, there is strong monetary support, which helps the labor market and other economic indicators to recover. 

The Fed Chairman Jerome Powell said that the labor market conditions improved rather unevenly but the household spending and business investments were increasing quite fast. At the same time, inflation boosted and remained pretty high but it happened due to the recovery of expenses. Powell believes that in the possibility that high inflation may remain for quite a long time, which is unusual because earlier the regulator told several times that a surge in inflation was temporary. Also, Powell said that if the Fed saw inflation going higher its target levels, the regulator would be ready to revise its monetary policy. 

The major result of the meeting is in favor of the “greenback” – no one is going to continue stimulating the economy if there are signs that the economy may recover by itself. This is the reason why the USD has been skyrocketing for the second consecutive day.

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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.