The main event of the week is over. During its last meeting of the year, the FOMC agreed on accelerating QE tapering by $30 billion, meeting market expectations. The Fed did not raise the interest rate - according to Jerome Powell, it would only be hiked after the full wind down of bond-buying in March 2022. Such monetary tightening is a bearish factor for stock market indexes and a bullish one for the USD, as investors would shift from equities to lower risk assets such as bonds or deposits. However, the market reaction to the news was counterintuitive.
After the announcement of the Fed meeting's results, USD rose against EUR by 40 pips, only to slump by 70 pips half an hour later. As a result, EUR/USD closed 30 pips higher on Wednesday, with minimal changes compared to Tuesday's closing price. Today, investors in Europe will price in the FOMC meeting's results, which could influence the pair significantly. The long-awaited announcement of faster tapering did not push up the US dollar. With all possible growth factors already priced in, bearish traders took profits from their short positions right after the meeting. This begs the question - will traders continue to dump USD, or will EUR/USD resume its slump in the near future?
