EUR/USD dropped to about 1.1362 in early European trade on Tuesday as the dollar
strengthened ahead of the Federal Reserve decision on Wednesday. Markets price
the Fed holding the policy rate at 3.50%-3.75%. Investors will focus on the Fed
statement and the chair's press conference for signals on inflation and the
economic outlook; the Fed is unlikely to offer new guidance on the policy path.
The CME FedWatch Tool shows an 80.8% probability of a rate hike at the September
meeting. In the euro area, markets await preliminary July HICP for Germany on
Thursday and for the euro area on Friday; those prints will be monitored for
their impact on ECB rate expectations.
