USD falls after the Federal Reserve meeting. Overview for 27.07.2023

The major currency pair remains strong on Thursday. The current quote for EURUSD is 1.1110.

The US Federal Reserve raised the interest rate by 25 basis points at its meeting yesterday, to 5.5% per annum – just as expected.

Sentiment remained restrained. In its comments, the Fed noted that there is no expectation of an interest rate cut this year, and the current environment does not allow the regulator to make many forecasts. Everything depends on incoming data: the rate may be raised or not in September.

Core inflation appears high to the Fed, and the main process of reducing consumer prices might take a long time. The target remains at the 2% level.

In the accompanying statement, there was no mention of recession at all, which is a positive sign. However, the Fed repeatedly emphasised its readiness for further tightening of the monetary policy if necessary. The regulator has its finger on the pulse, as always.

So, it was all informative, but investors did not have many trump cards to play. Clarity was lacking, except for the fact that the Fed is assessing the inflationary structure cautiously and is ready to react at any moment.

The meeting of the European Central Bank is scheduled for today. There may also be significant volatility around it, but its decisions are generally clear: the interest rate will go up because inflation is not controllable.

Today the market is also focused on the US second-quarter GDP report.