The EUR/USD exchange rate dipped to around 1.1680 during early trading in Europe on Thursday. This shift came as the US dollar gained strength against the euro following the US Federal Reserve’s decision to keep interest rates steady. Attention is now shifting towards the European Central Bank’s (ECB) upcoming rate decision scheduled for later today.
At their April policy meeting, Fed officials opted not to change the benchmark federal funds rate, maintaining it within the range of 3.5% to 3.75%. Four members opposed this move, with three critiquing the post-meeting language indicating a potential return to rate cuts in the future. This 8-4 vote reflects the first time since 1992 that such dissent occurred within the committee.
Jerome Powell announced on Wednesday that he would remain on the Fed board indefinitely, even after his term as chair concludes. Meanwhile, Kevin Warsh, nominated by President Trump, is positioned to take over Powell’s role at the Fed.
With a great deal of uncertainty in the air, many analysts expect the ECB will likely hold its key interest rate steady during today’s meeting. However, surging inflation driven by volatile energy costs—exacerbated by the ongoing conflict in Iran—has raised speculation about a potential rate increase in June.
An analysis from Goldman Sachs anticipates that the ECB will boost rates by 25 basis points in two increments: once in June and again in September, bringing the deposit interest rate back to 2.50%.
