EUR skyrocketed. Overview for 04.05.2023

EURUSD increased noticeably overnight, having good reasons for it. The current EURUSD quote is 1.1090.

The US Federal Reserve System raised the rate by 25 base points to 5.25% per annum, which was not unexpected.

The unusual part was the Fed's signals: it seems that the cycle of interest rate hikes is coming to an end. The Fed wiped out all indications of further rate increases from its follow-up speech but did not openly talk about the pause either. This is very characteristic of the regulator – making statements without revealing much. The interest rate will be kept high for some time, with the decision to reduce it to be made at a later stage.

All this could be read between the lines. Jerome Powell, the Fed's chairman, has been successful in presenting decisions in a way that would not provoke excessive volatility in capital markets. He also mentioned the public debt limits: it was important, Powell said, not only to raise the limits but also to avoid losing valuable time.

The US dollar quickly drew all the necessary conclusions: the interest rate is likely to remain unchanged for three to four months, after which the Fed will smoothly revise the inflation situation. This is bad news for the USD, and it was reflected in the quotes.