The EUR/USD pair climbed back near 1.0770 in European trading on Thursday after touching a four-month low below 1.0700 on Wednesday. The dollar pulled back from recent highs ahead of the Federal Reserve’s expected interest rate decision later in the day.
The dollar index (DXY) surged over 1.6% on Wednesday—its biggest daily gain in almost four years—after Republican Donald Trump won the U.S. presidential election against Democratic candidate Kamala Harris. The rally in the dollar stemmed from Trump's campaign pledges to increase import tariffs and lower corporate taxes, moves that could drive inflation by raising costs on imports and spurring domestic spending.
Following Wednesday’s spike, the DXY slipped back to around 104.80 as markets await the Fed’s next steps. The central bank is expected to announce a 25 basis-point rate cut, bringing rates to a range of 4.50%-4.75%. Traders will be closely watching Fed Chair Jerome Powell’s remarks for any indications on whether the Fed might reconsider its rate-cutting approach in light of potential inflationary pressures under Trump’s policies.
