EURUSD dropped. Overview for 14.12.2021

EURUSD retreated yesterday and remains weak on Tuesday. 

The major currency pair remains under slight pressure. The current quote for the instrument is 1.1276.

The “greenback” got a little stronger yesterday after the demand for “safe haven” assets was revived. That was good for the USD, as usual. 

At the moment, market players are putting their whole minds on the US Fed’s monetary decisions to be announced tomorrow. Everything that the American regulator is going to say tomorrow will be defining the “greenback” movements for the foreseeable future.

Investors are expecting the Fed to provide a detailed strategy on the QE programme closure in the US. As of now, the programme is believed to be closed as early as March 2022. What happens then depends on how the regulator sees the benchmark interest rate in 2022. Average expectations imply two hikes next year for a total of 50 basis points. If the Fed confirms it, the USD may fall on facts. On the other hand, if the regulator leaves this door open implying three or even more rate hikes, the “greenback” will strengthen.

Therefore, if the Fed wants to follow its plan and prevent financial markets from getting extremely volatile, the results of tomorrow’s meeting should be a real “piece of art”. To succeed here, the regulator should be very cautious in its comments.