The FOMC delivered a 25 bps increase in the Fed Funds target range to 4.75%-5.00%. A policy messaging wedge with the ECB allows scope for the Euro to exercise some monetary dominance, economists at TD Securities report.

EUR to perform against currencies where central banks have committed to a pause

“Tone from the Fed is decisively different than the ECB, which is now celebrating the idea that they successfully averted contagion and financial system turmoil. Moreover, they seem to suggest that they can keep hiking. That may be the case (we expect some additional tightening), but it allows scope for EUR to exercise some monetary dominance.” 

“There is less room for adjustment on the curve versus SOFR into the late whites and up to the mid-reds. We think this will be particularly impactful on crosses and against currencies whose central banks have already expressed or committed to move itself to the sidelines. That means that EUR/CAD and EUR/AUD should have more room to the upside.”