The major currency pair is moderately retreating on Tuesday. The current EURUSD quote is 1.0910.
The beginning of the week has been calm, bringing no significant news. Given this, the market has focused on what it already knows: the decision of the US Federal Reserve to pause its series of monetary policy tightening and prepare a plan for July.
The Fed will gather data within the month and decide what to do with its tight monetary policy going forward. Over the past 15 months, interest rates have increased more than significantly and are currently standing at 5.25% per annum. More time is needed to assess the full impact of the interest rate hikes on the economy.
It is already evident that the 5% rate increase over the specified period has helped reduce the CPI to 4% from 9.1%. Although this is a good result, the inflation target is still lower, at the level of 2%.
If the Fed continues to raise the interest rate and sets it too high, many businesses as well as individual consumers will cut their spending. Employers will have to lay off employees to sustain their business. This could trigger a tough recession phase. On the other hand, keeping the rate at the current level could lead to a rise in inflation.
The Fed appears to have reached an impasse.