The EUR/USD rallied sharply after hitting a daily low of 1.1105 after Federal Reserve Chairman Jerome Powell said, “The time has come for policy to adjust,” opening the door to ease policy.
Traders react by selling the Greenback, pushing EUR/USD to its highest level of the year at 1.1183. Fed Chair Powell signals readiness to adjust policy, opening the door for potential rate cuts, boosting the EUR/USD. US 10-year Treasury yield drops to 3.81% as market anticipates possible 50 basis point cut at the September Fed meeting. Therefore, the major jumped toward 1.1170 and posted gains of over 0.54%.
What is the ECB and how does it impact the Euro? The European Central Bank in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
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