FX.co ★ Euro Steadies Near 2021 Highs as Fed Decision Looms

The euro held firm just above $1.18, maintaining its position near its peak since September 2021, as investors awaited the forthcoming policy announcement and updated economic forecasts from the US Federal Reserve, expected later today. Analysts widely anticipate that the Fed will reduce interest rates by a minimum of 25 basis points and hint at additional monetary easing measures. This anticipation stems from policymakers balancing a cooling labor market with ongoing inflationary challenges driven by tariffs. In contrast, European officials have maintained a more cautious stance. Isabel Schnabel, an executive board member of the European Central Bank (ECB), advised policymakers to proceed with caution, highlighting risks associated with tariffs, services inflation, food prices, and fiscal policy. Peter Kazimir, the governor of the Slovak central bank, reinforced this cautious approach, stating it would be a "mistake" to underestimate these risks. Last week, the ECB opted to keep borrowing costs stable for a second consecutive meeting, signaling that the cycle of rate reductions might have concluded.