Euro steady before ECB decision, dollar holds ground as Fed stands pat
TLT•The euro held near $1.1145 ahead of an expected ECB rate hold, while the dollar steadied after the Fed left rates unchanged and traders reduced bets on 2027 rate hikes. The dollar index was at 102.18, and the U.S. two-year Treasury yield fell nearly 7 basis points to 4.6705%.
1. Euro awaits ECB decision
The euro eased slightly to $1.1145 ahead of the European Central Bank’s policy decision, where questions about France’s bond-market turmoil and ECB President Christine Lagarde’s future are expected to feature. The ECB is expected to keep rates on hold. The euro is down 5.1% against the dollar this year, while speculators’ net short euro position reached $18.89 billion, its largest in a decade, according to weekly data from a U.S. regulator.
2. Fed decision shifts rate bets
The Federal Reserve left rates unchanged in a 10-2 decision and described the economy as growing at a “strong pace.” Comments by Fed Chair Kevin Warsh that inflation could return to the 2% target without slowing growth or raising unemployment helped traders rein in bets on rate hikes in 2027. The dollar index stood at 102.18, and the two-year Treasury yield fell nearly 7 basis points in Asian trading to 4.6705%.
3. Markets watch the BOJ
The Bank of Japan is due to conclude its two-day meeting on Friday and is expected to hold rates steady. The dollar was roughly flat at 157.755 yen. Markets are looking for a signal from Governor Kazuo Ueda that the BOJ has met its underlying inflation target and is laying the groundwork for a December rate hike, currency strategist Carol Kong said.
