EUR/USD middles post-Fed, US GDP data in the pipe

• EUR/USD eased slightly lower on Wednesday after testing the low side.
• The Fed held rates steady, as markets broadly expected.
• With the Fed’s latest rate call out of the way, markets await key US data to see if they were right.

EUR/USD drifted into the low side on Wednesday, dipping below 1.0400 before getting pushed back into touch range of the day’s opening bids. The Federal Reserve (Fed) delivered little of note in its latest rate call, sparking a slight uptick in volatility but little meaningful momentum as Fiber traders await actual changes in interest rates, or at least some signal that they might be coming.

US fourth-quarter Gross Domestic Product (GDP) growth will be reported on Thursday. Median market forecasts anticipate a decrease in annualized GDP growth, with a projection of 2.6% compared to the previous 3.1%. Inflationary pressures remain a concern, and the Q4 GDP Price Index is expected to rise to 2.5% from 1.9%. 

December’s Core Personal Consumption Expenditures Price Index (PCEPI) will print on Friday. The monthly PCEPI figure for December is forecast to increase to 0.2% month-over-month from the previous month’s 0.1%, and the annual figure is expected to remain steady at 2.8% year-over-year, still frustratingly above the Fed’s 2% annual target and challenging hopes for an acceleration in the pace of interest rate changes.

The Federal Reserve (Fed) maintained rates on Wednesday, as futures markets had largely anticipated, and Fed Chair Jerome Powell emphasized the Fed's data-dependent approach to rate adjustments. Chair Powell noted that the Federal Open Market Committee (FOMC) is closely monitoring the policies enacted by US President Donald Trump. Still, he denied that the newly elected President has had direct contact with the Fed. 

As an independent federal institution, the White House has limited influence over the policy guidance set by the Federal Reserve. Chair Powell reiterated that while inflation is progressing towards the target median levels, the current economic landscape, along with concerns over the substantial trade policies being pursued by President Trump, indicates that the Fed is not in a hurry to change the restrictiveness of policy rates. Rate markets have reduced their expectations for Fed rate cuts in 2025. According to the CME's FedWatch Tool, futures markets are pricing in no changes to the federal funds rate until June at the earliest.

EUR/USD price forecast

EUR/USD is getting hung up in technical congestion at the 50-day Exponential Moving Average (EMA) near 1.0450, but both bulls and bears appear to have run out of gas. Fiber remains capped below the 1.0500 handle, and downside pressure is unable to build momentum below 1.0400.

EUR/USD daily chart