Investors remain cautious ahead of the Federal Reserve’s policy announcement, keeping the euro near a monthly low against the dollar.
The EUR/USD pair traded just above 1.1350 in early Asian trading on Tuesday, consolidating near its monthly low. Market participants are adopting a wait-and-see approach ahead of the Federal Reserve’s two-day policy meeting, which concludes Wednesday. The Fed is widely expected to hold interest rates steady, but investors will focus on signals about future policy direction, which could drive near-term dollar movements and impact the currency pair.
Recent easing of US-Iran tensions led to a decline in crude oil prices, reducing inflation concerns and tempering expectations for further Fed rate hikes. This has capped the dollar near its monthly high and provided some support to the euro. However, lingering risks to global oil supplies keep inflation pressures in play, favoring dollar bulls. The fundamental outlook still leans toward a stronger dollar, suggesting any euro recovery may face selling pressure.
Traders are advised to await strong follow-through buying before confirming a near-term bottom for the EUR/USD pair. The Fed’s decision and accompanying commentary will be critical in determining the pair’s next move.