BlockBeats report, July 30: Deutsche Bank’s foreign exchange research team noted that after the Federal Reserve held interest rates steady but revealed significant internal divisions, the U.S. dollar index briefly declined while the euro rose. The weaker dollar tone, combined with market pricing for a September rate hike and rising long-term U.S. Treasury yields, collectively drove the EUR/USD pair higher, reflecting a shift in market expectations for U.S. monetary policy. The bank’s analysts stated: “Three officials voted against the decision, favoring a 25-basis-point rate hike, highlighting growing concerns over persistent inflation.”
The market interpreted this decision as less hawkish than the dissenting votes suggested, pushing down U.S. 2-year Treasury yields and the dollar. However, long-term yields rose significantly, as investors believed the Fed’s response was insufficient to curb persistent inflation. Federal funds futures indicate a 63% probability of a 25-basis-point rate hike in September. Market expectations for total rate hikes this year have been lowered from 42 basis points on Tuesday to 33 basis points. (Jin10)