Fed’s divided decision to keep rates at 3.50-3.75% weakens USD, lifting EUR/USD amid shifting policy expectations.
The Federal Reserve left its benchmark rate unchanged at 3.50-3.75% for the seventh straight meeting, but three officials dissented, favoring a 25-basis-point hike. The split highlighted concerns over persistent inflation, though markets viewed the decision as less hawkish than the dissents suggested.
The Dollar Index fell 0.5% to 100.89, while EUR/USD climbed, supported by softer short-term Treasury yields and higher long-end yields. Fed funds futures now price a 63% chance of a September hike, down from 42 basis points earlier in the week.
Investors await today’s U.S. data, including Q2 GDP and PCE inflation, with consensus expecting 2% annualized growth versus 2.1% in Q1.