EUR/USD held its mid-point on Wednesday, holding near the 1.1300 level after the Federal Reserve's (Fed) latest interest rate announcement came in line with traders' expectations, albeit with a fresh set of "wait and see" warnings from Fed Chair Jerome Powell. The economic calendar on the European side remains mid-level this week, leaving Fiber traders to sit back and digest the increasingly cautious Fed.

Fed's Powell: The right thing to do is to wait for more clarity

The Fed's recent interest rate announcement highlighted that while US employment and economic activity remain strong, concerns about risks to employment and output have increased, particularly due to uncertainties related to US tariffs and trade policy. Concerns among Fed officials about these economic risks have raised market expectations for an imminent rate cut, which temporarily pushed EUR/USD higher.

However, market sentiment declined following Fed Chair Jerome Powell's press conference. He stressed that if US trade tariffs remain in place, they would hamper the Fed's goals for inflation and employment for the rest of the year.

Chairman Powell also warned that ongoing policy uncertainty will likely cause the Fed to continue to take a ‘wait and see' stance on interest rates. While the Trump administration's tariff policies have had a significant negative impact on consumer and business confidence, actual economic data has shown little adverse impact, making it difficult for the Fed to make any immediate rate adjustments.

According to the CME's FedWatch Tool, market participants are still pricing in a quarter-point rate cut in July. However, the probability of holding rates steady in July has risen to 30%, dampening widespread market expectations for a smooth transition to a new rate-cutting cycle. (Newsmaker23)

Source: FXstreet