April 29, 2026 – The euro weakened against the U.S. dollar on Tuesday, pushing the EUR/USD pair toward the 1.1700 mark. Traders are positioning ahead of the Federal Reserve’s upcoming interest rate decision, which is scheduled for later this week.
The pair slipped to 1.1705 during early European trading, its lowest level in three weeks. It has since recovered slightly to trade near 1.1715.
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Market participants are pricing in a high probability of a 25-basis-point rate hike from the Fed. That would bring the federal funds rate to a range of 5.50% to 5.75%.
Fed Expectations Drive Dollar Strength
The dollar index climbed 0.3% on Tuesday, reflecting broad-based demand for the greenback. Investors see the Fed maintaining its hawkish stance as inflation remains above the central bank’s 2% target.
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Data from the CME FedWatch Tool shows a 78% probability of a quarter-point hike. That expectation has been building since stronger-than-expected U.S. retail sales data was released last week.
According to market analysts, the Fed’s decision will likely dominate currency trading this week. The central bank’s forward guidance on future rate moves will be closely scrutinized.
Industry watchers note that any dovish surprise from the Fed could trigger a sharp reversal in dollar strength. But the current consensus leans toward continued tightening.
Eurozone Economic Data Disappoints
The euro faced additional pressure from weak economic data out of the eurozone. Germany’s IFO business climate index fell to 89.3 in April, missing expectations of 90.5. That marked the third consecutive monthly decline.
European Central Bank officials have signaled that rate cuts could begin as early as June if inflation continues to moderate. That prospect has weighed on the euro’s appeal relative to the dollar.
The divergence in monetary policy outlook between the Fed and the ECB is a key driver for the pair. The Fed is still tightening while the ECB is preparing to ease.
This suggests that the euro could face further downside in the near term.
Technical Levels in Focus
The 1.1700 level is a major psychological support zone. A break below that could open the door to a test of 1.1650, the low from early April.
On the upside, resistance is seen at 1.1750, followed by the 50-day moving average near 1.1800. A move above that level would require a significant catalyst, such as a less hawkish Fed statement.
Trading volumes are expected to remain elevated as the market awaits the Fed’s announcement. The decision is due at 2:00 p.m. Eastern on Wednesday.
What this means for investors is that short-term volatility in the EUR/USD pair is likely to persist until the Fed’s policy path becomes clearer.
Market Outlook
Beyond the Fed decision, traders will watch U.S. GDP data due later this week. A strong reading could reinforce the case for higher rates for longer.
The eurozone’s first-quarter GDP data is also on the calendar. A contraction could add to the euro’s woes.
For now, the dollar holds the upper hand. The EUR/USD pair remains under pressure as the market prices in a hawkish Fed and a cautious ECB.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
