Euro/Dollar Pair Bounces Following US Fed Monetary Policy Minutes
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Euro/Dollar Pair Bounces Following US Fed Monetary Policy Minutes

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Azeez Mustapha

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The euro-dollar (EUR/USD) pair continues to trade around 1.0600 following the release of the US Federal Reserve’s (Fed) December monetary policy minutes, which revealed that policymakers remain committed to combating inflation and do not foresee a rate reduction in 2023.

As a result, the EUR/USD fell to 1.0585 before rising to the current price. The EUR/USD exchange rate is currently hovering around 1.0607 as I type.

According to the Federal Reserve’s December minutes, officials decided to limit the rate of interest rate increases, but they also stressed that this did not signify a “weakening commitment to achieving price stability,” given that inflation is already on a long-term downward trajectory.

They further stated that “no one predicted that rate cuts would be necessary for 2023,” adding that the US central bank has made substantial strides toward adopting restrictive policies in 2022.

The minutes hinted that inflation worries would persist longer. Even though the Fed welcomed the decrease in inflation in October and November, these figures do not show that inflation is on a “persistent downward path.”

Australian Dollar on the Rise

Earlier on Wednesday, the AUD/USD rose along with the risk-on trend, increasing the recovery by more than 2% amidst a widespread US Dollar decline and a resurgence of trade optimism between China and Australia.

The Australian only stopped this persistent approach when numerous media outlets reported that China is considering partially lifting its ban on Australian coal imports.

Positive market sentiment in Europe only served to fuel an increase in the higher-yielding Australian dollar at the expense of the US dollar, a safe haven currency.

According to MNI, traders also profit from the positive attitude of the RBA (Reserve Bank of Australia). The Reserve Bank of Australia, according to the research, believes “accumulated savings, a tight jobs market, and spending cuts will make higher interest rates manageable for most homeowners.”

The US ISM Manufacturing PMI announcement and the Fed’s December meeting are still important events for the AUD/USD pair since they could have a big impact on US Dollar valuations and ultimately affect the currency pair.

 

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