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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

EUR/USD price analysis: Euro hits 1.0800 as Fed delays rate cuts

Hawkish sentiment from the Fed has pushed out potential rate hikes and sent euro-dollar lower. Check in on rate forecasts for March and how currency markets were affected.

Source: Bloomberg

Key points

  • EUR/USD broke below 1.0800 after the January FOMC meeting (0:39)
  • March rate cut not in "base case" for Fed (1:44)
  • Maybe not March, but cuts expected (2:42)
  • Euro bounces with lower US yields (4:30)
  • 56% of EUR/USD traders at IG are short (6:13)

EUR/USD price action

Following the Federal Reserve's January meeting on Wednesday, US dollar strengthened against major pairs - euro included. EUR/USD traded below 1.0800 intraday Wednesday before regaining ground slightly.

Euro-dollar and the Fed

The Federal Reserve's stance on interest rates is a primary driver of currency movements. Despite the March rate cut not being in the "base case" scenario for the Fed, anticipation is building in the trading community regarding potential rate adjustments. Although a cut in March may not be on the cards, the market is abuzz with expectations that rate cuts could be expected down the line. These expectations are crucial for traders as they strategize on their positions in currency pairs like EUR/USD.

In response to the evolving economic outlook, the euro saw a bounce back, coinciding with lower US yields. This inverse relationship between the yields on U.S. Treasury securities and the strength of the euro can provide a tactical play for astute traders. By closely monitoring yield movements, traders can potentially predict and react to similar currency pair fluctuations, positioning themselves for gains as market conditions shift.

Interestingly, data from IG suggests that 56% of traders dealing with EUR/USD are short. This statistic reveals a bearish outlook among a majority of traders, indicating a common expectation that the euro may weaken against the US dollar in the near term. For traders, understanding such market sentiment can be invaluable as it offers insight into the prevailing trading bias and potential pressure points for price movements.

For those trading EUR/USD, the current landscape presents both challenges and opportunities. Traders must remain vigilant, keeping a close watch on monetary policy signals from the Fed, economic indicators that might influence yields, and overall market sentiment.

Data current as of 2/1/2024

How to trade EUR/USD

  1. Open an account to get started, or practice on a demo account
  2. Choose your forex trading platform
  3. Open, monitor, and close positions on EUR/USD

Trading forex requires an account with a forex broker like IG. EUR/USD can be found in the "Major" pairs tab. Many traders watch other major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.

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