EUR/USD to plummet towards 1.08 on more hawkish than expected Fed – Scotiabank

EUR/USD extends the weekly rebound further north of the key barrier at 1.10 ahead of the Federal Reserve's all-important interest rate decision. A hawkish outcome could drag the pair down to test the 1.08 level, economists at Scotiabank report.

EUR/USD could test 1.11 on a cautious hike

“The EUR/USD pair will trade cautiously ahead of the Fed’s policy decision that we expect will kick off a sharp widening of short-rate differentials that will act against the EUR versus the USD.” 

“A more hawkish than expected decision should pull EUR/USD under the 1.09 mark toward a re-test of 1.08 over the balance of the week, while a cautious hike could see the pair aim for a test of 1.11 – although we think the trend remains negative with the Fed set to generally meet market expectations through 2022.”

See – Fed Preview: Forecasts from 14 major banks, raising rates but with a huge asterisk related to the war