Euro retreats below 1.1600 with Kevin Warsh and the Fed in the spotlight

The Euro (EUR) posts moderate losses against the US Dollar (USD) on Wednesday, giving away some of the ground gained over the last few days, with markets showing a cautious mood ahead of the US Federal Reserve’s (Fed) decision. The EUR/USD pair has pulled back to levels below 1.1600 but, so far, remains trading within Tuesday’s range.

On Wednesday, all eyes are on the outcome of the Federal Market Open Committee (FOMC) meeting, the first one under the leadership of Chairman Kevin Warsh. Warsh has been appointed by US President Donald Trump to cut interest rates, with inflation well above the bank’s target and the bank’s independence in question.

Warsh might skip the "Dot Plot"

The Fed is widely expected to leave its monetary policy unchanged, and therefore, the focus will be on Warsh’s press release to spot differences with its predecessor, Jerome Powell, and the economic and interest rate projections. Market rumours suggest that Warsh might not participate in the “Dot Plot”.

Before that, US Retail Sales data for May is expected to show figures broadly in line with those released in the previous month. The impact on the US Dollar likely to be minimal.

Meanwhile, markets are awaiting further details from the US-Iran trade deal while rivals ramp up their rhetoric. Iran has vowed a “hard response” if Israel keeps attacking Lebanon, and US President Donald Trump said at the G7 summit that he is ready to go back to “dropping bombs” if he does not like the agreement.

In the Eurozone, May’s final Harmonized Index of Consumer Prices (HICP) confirmed preliminary figures of a 3.2% year-on-year (YoY) growth and a 0.1% uptick on the month. The core HICP, on the other hand, has been revised higher to a 2.6% YoY growth, its highest reading in more than a year, from previous estimations of a 2.5% growth.