Anna 
EUR/USD rebounded into the 1.0900s on Thursday, gaining ground after the Federal Reserve (Fed) opted to maintain its policy status quo, contrary to market expectations for a more hawkish stance amid recent inflationary pressures.
The Fed’s decision to leave the Fed Funds Rate unchanged at 5.25%-5.50% aligned with consensus forecasts. However, the accompanying Summary of Economic Projections (SEP) projected a median target of 4.6% for 2024, indicating expectations of approximately three 25 basis points (bps) rate cuts this year, despite speculation for a reduction to two cuts due to persistent inflation.
While the Fed anticipated fewer rate cuts in 2025, with the Fed Funds Rate forecasted to reach a median of 3.9%, the substantial upward revisions in GDP forecast to 2.1% for 2024 from 1.4% in December signaled confidence in a “soft landing.” Additionally, the Core Personal Consumption Expenditure (PCE) Price Index, the central bank’s preferred inflation gauge, was revised upward to 2.6% for 2024 from 2.4% previously.
Federal Reserve Chairman Jerome Powell, in his post-meeting press conference, downplayed recent inflationary data, emphasizing the need for more evidence before altering the Fed’s trajectory.
The market reaction reflected a “dovish hold,” leading to a selloff of the US Dollar from overbought levels and a rally in EUR/USD.
Looking ahead, market participants await the release of Eurozone March Purchasing Manager Indices (PMI) by S&P Global and Hamburg Commercial Bank (HCOB) at 10:00 GMT. The flash estimate will provide insights into the region’s economic health, with expectations for improvement in Composite PMI to 49.7 from 49.2 in February. A higher-than-expected PMI result would likely bolster EUR/USD, while a lower-than-expected figure could exert downward pressure on the pair.
