EUR/USD: Euro Dives Back Near $1.08 as Cautious Traders Brace for Fed Minutes

Muted mood swept forex space with speculators taking a flight to dollar safety ahead of expected hints into interest rate timeline.

• The EURUSD pair was treading water early Wednesday with forex traders stepping cautiously ahead of a big data dump later today. The Federal Reserve will be releasing its minutes from the last meeting three weeks ago. And all eyes will be on the forward-looking guidance into the interest rate timeline. Volatility is expected to pick up big time if there are any hints of interest rate cuts in the coming months.
• Still, analysts are calling for no surprises, expecting that markets will get the same “we’re data dependent” treatment from the US central bank. Fed boss Jerome Powell has reiterated many times that policymakers are carefully monitoring all incoming reports and are ready to start slashing interest rates the moment data show that the economy could derail and throw businesses and consumers off kilter.
• In that context, the euro-dollar pair was floating sideways near the $1.0850 handle. The European currency has tumbled a bit, sliding from a monthly high of just under $1.09 to current market prices. Despite the modest drop, the euro has gained 2.5%, or 250 pips, against a (finally) weakening dollar over the past 5 weeks. In other corners of the forex space, the yen remained fairly muted early Wednesday morning after sinking beyond 156.50 to the dollar.