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EUR/USD rebounds to near 1.0400 as the US Dollar takes a breather after the rally induced by the Fed’s hawkish guidance. Fed officials see only two interest rate cuts in 2025, fewer than the four projected earlier. ECB Wunsch said he is comfortable with market expectations of four 25 bps interest rate cuts in 2025. EUR/USD jumps to near 1.0400 in Thursday’s European session as US Dollar’s (USD) bulls take a breather after a sharp run-up on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near a fresh two-year high above 108.00. The Greenback attracted significant bids after the Federal Reserve (Fed) reduced its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% on Wednesday, as expected, but signaled fewer interest rate cuts for the next year. In the latest dot plot, the Fed revised its projections for the number of interest rate cuts in 2025 to two from the four forecasted in the September monetary policy meeting.  In the press conference, Fed Chair Jerome Powell pointed to uncertainty over inflation, easing downside risks to employment and strong growth in the second half of the year as factors that forced officials to turn cautious on interest rate cuts. “I also point out that we’re closer to the neutral rate, which is another reason to be cautious about further moves,” Powell added. Meanwhile, the Fed has also revised the forecast for the core Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred inflation measure, for 2025 to 2.5%, up from prior estimates of 2.2% in its latest economic projections. Jerome Powell refrained from commenting on the consequences of the incoming immigration, tariff, and taxation policies by President-elect Donald Trump on the economy. “It is very premature to make any kind…

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Filed under: News - @ December 19, 2024 8:29 am