United States Federal Reserve rate decision and economic projections

Upcoming catalystiThe event that could move the exchange rate.

The United States Federal Reserve interest-rate decision, policy statement, updated economic projections and press conference. The decision is unusually important because markets are split between no change and a 25 basis point rate increase.

Event date and timeiWhen the event is expected. Shown in your own time zone, or in UTC if you switch the clock at the top of the page. If the exact hour is not confirmed, you only see the date.

Scheduled for 16 September 2026, 18:00 UTC. The press conference is scheduled for 18:30 UTC. The meeting runs on 15 and 16 September and includes updated economic projections.

Main currency pair affected

EUR/USD. It is the cleanest expression because the European Central Bank decision occurs six days earlier, allowing its result to be absorbed before the Fed announcement. I rejected USD/JPY because the Bank of Japan meets on 17 and 18 September. I rejected GBP/USD because the Bank of England decision creates competing UK rate risk.

Current priceiWhere the exchange rate stood when this write-up was made, and when that was.

1.1613 as of 04 Sept 2026, 20:59 UTC, the closing rate of the week.

Expected directioniWhich way we expect the token price to go after the event. Positive means it rises, Negative means it falls, Mixed means it could go either way.

Negative. My base case is that EUR/USD falls because the Fed is slightly more likely to raise rates, while a 25 basis point ECB increase on 10 September is already heavily priced. A negative call means the euro weakens against the US dollar.

Action before the eventiWhat we suggest you do before the event. Buy, Watch or Avoid.

Watch. Do not enter before the ECB decision on 10 September and US CPI on 11 September. If CPI remains firm and EUR/USD stays below 1.1645, selling the pair becomes the preferred setup. The event is tradable, but early entry exposes you to two major catalysts before the Fed.

Why it mattersiHow the event reaches the price. Through demand, supply, how much the network is used, fees, or the rules the token trades under.

A Fed hike or hawkish guidance means higher expected US rates, then higher short-term Treasury yields, then a wider US yield advantage, then stronger demand for dollars, then lower EUR/USD. A Fed hold with softer guidance reverses that chain. The euro side also matters. The ECB is expected to raise its deposit rate, but that increase is close to fully priced, limiting the extra support it may give the euro.

Catalyst confidenceiHow sure we are that the event happens as described. Scored out of 100. Higher means more sure.

99%. The meeting, decision time, projections and press conference are officially scheduled. My outcome estimate is less certain. I assign about a 60% probability to a 25 basis point hike, close to the 58.4% market-implied probability recorded after the August employment report.

Price-reaction confidenceiHow sure we are that the pair moves the way we expect. Scored out of 100. Higher means more sure.

62%. The rate decision is genuinely uncertain and the US yield advantage supports the dollar. Confidence is limited because US CPI and the ECB decision will change the information available before the Fed meets.

Expected moveiHow far we think the price moves, and how long the move may last.

Our Expected Move -60 to -110 pips, which is -0.52% to -0.95%, if the Fed raises rates and keeps further tightening possible. This is a forecast, not a certain result. The 60 pip percentage is 0.0060 divided by 1.1614. The 110 pip percentage is 0.0110 divided by 1.1614. The 17 June 2026 Fed meeting produced an immediate EUR/USD decline of close to 50 pips after hawkish projections. The 29 July meeting produced a 31.4 pip rise within 60 minutes and roughly 78 pips over the full day after the Fed failed to meet hawkish expectations. The last three meetings averaged only 24.3 pips in the first hour, but this meeting has greater binary risk because the market is divided between a hold and a hike. Impact High. The expected range is about 1.2 to 2.1 times the recent 52.1 pip average daily range. Estimated Duration 1 to 3 days. A simple one-time hike could fade within one session. A hike combined with projections showing further tightening could begin a multi-day repricing of US yields and the dollar.

What exactly is happeningiThe event itself in full. Who is involved, what changes, and the amounts and conditions that matter.

The Federal Open Market Committee sets the target range for overnight US interest rates. It will also publish new forecasts for growth, unemployment, inflation and the expected policy-rate path. The previous decision on 29 July kept the target at 3.50% to 3.75%. The vote was 9 to 3, with three officials preferring a 25 basis point increase. Forex traders care because expected interest rates influence bond yields and the return investors receive from holding each currency.

Market expectationsiWhat most traders currently expect to happen. Bullish means they expect a rise, Bearish a fall, Neutral neither.

Bearish for EUR/USD. Fed funds futures priced a 58.4% probability of a 25 basis point increase to 3.75% to 4.00%, and a 41.6% probability of no change, after the 4 September employment report. The previous decision was a hold. The market therefore leans toward dollar strength but has not settled on one result.

How much is already priced iniHow much of the expected outcome the exchange rate already reflects before the event happens.

Medium. A 25 basis point Fed increase is slightly more than half priced, while the ECB increase expected on 10 September is roughly 89% priced. EUR/USD remains inside a broad technical range instead of showing a decisive pre-event dollar breakout. US two-year yields have risen, but euro positioning is already net short, which reduces the reward from chasing the dollar at a poor entry.

Bullish scenarioiWhat would have to happen for the price to rise, and why the market would read it that way.

EUR/USD would probably rise if the Fed holds at 3.50% to 3.75% and indicates that another increase is not imminent. A projection path showing no additional 2026 tightening could trigger a dollar sell-off and a squeeze in existing euro short positions. A move above 1.1711 would strengthen this scenario.

Neutral scenarioiThe outcome that simply meets expectations and moves the price very little.

A 25 basis point hike described as a one-time adjustment could create an initial EUR/USD decline that fades. A hold combined with firm inflation warnings could also produce limited movement because the rate result and the guidance would point in opposite directions.

Bearish scenarioiWhat would have to happen for the price to fall. A delay, a disappointment, or supply nobody expected.

EUR/USD would probably fall if the Fed raises the target to 3.75% to 4.00% and keeps another increase possible. This would preserve or widen the US rate advantage even after the expected ECB hike, supporting US yields and the dollar.

Result needed for a big moveiWhat the outcome has to be for the pair to move a lot instead of a little.

For a large EUR/USD decline, the Fed needs to raise rates by 25 basis points and show that at least one additional increase remains possible before the end of 2026. A hike described as the final move is unlikely to produce a lasting 100 pip decline. For a large rise, the Fed needs to hold and remove the near-term tightening signal.

Other currency pairs affected

USD/JPY would probably rise after a hawkish Fed, but it is a noisier expression because the Bank of Japan meets two days later. GBP/USD would probably fall, but the Bank of England decision creates competing risk. USD/CHF would probably rise, although changes in safe-haven demand can interfere with the rate thesis.

What else lands that dayiOther news and events on the same day that could push the price around, and whether they help this trade, bury it, or work against it.

The Federal Reserve decision at 18:00 UTC on 16 September 2026, with a fresh summary of economic projections and a press conference about half an hour after, is the event. On the US side the day also carries advance retail sales at 12:30 UTC and business inventories at 14:00 UTC, both of which feed the same rate story rather than competing with it. The important fact about this day is on the other side of the pair: the European Central Bank decided on 10 September, six days earlier, and does not meet again until 29 October. I could not confirm a major scheduled euro area release for 16 September itself. Net effect: the euro leg of this pair is settled and the dollar leg is not, which makes this a one-sided trade rather than a contest between two central banks. What to expect on the day. Expect the whole move to come from the dollar. That is cleaner than it sounds, because it removes the usual problem of not knowing which half of a pair moved, and it means the dot plot maps almost directly onto the rate. Be aware of what follows rather than of what competes: 18 September is quarterly index expiry and 30 September is quarter end, and month-end and quarter-end fixing flows in this pair are large enough to overwrite a policy move that has not had time to settle.

Main risksiWhat could go wrong, and what would prove this call wrong.

High. US CPI on 11 September could change the rate probability sharply. The ECB decision on 10 September could move EUR/USD before the Fed. A soft CPI report may lead the Fed to hold. A hike may also be fully absorbed if guidance signals no further tightening. Geopolitical developments, energy prices and abrupt risk-off demand can produce a dollar move unrelated to the decision.

What the market may be missingiSomething we think investors have overlooked or read wrong.

The expected ECB increase is much more fully priced than the possible Fed increase. The July Fed meeting already produced three votes for a hike. August payrolls rose by 162,000, unemployment held at 4.1%, and the prior two months were revised upward by a combined 55,000. This makes a Fed hike more credible than the calm EUR/USD price structure suggests. The key weakness in this argument is that wage growth slowed to 3.1%, giving officials a reason to wait if CPI improves.

TrendiWhether the price is above or below its own 50-day and 200-day averages. Above both is an uptrend, below both is a downtrend.

Short term is Neutral. From the 31 August close near 1.1618 to 4 September at 1.1614, EUR/USD fell about 4 pips, or 0.03%. The five-session high was 1.1643 and the low was 1.1566. Medium term is mildly Bullish. From approximately 1.1561 on 7 August to 1.1614, the pair gained about 53 pips, or 0.46%. The period high was approximately 1.1711 and the low was approximately 1.1502. Longer term is Bearish. From about 1.1750 at the start of 2026 to 1.1614, the pair fell about 136 pips, or 1.16%. The 2026 high was approximately 1.2075 and the low was approximately 1.1325.

Market structureiThe shape of the chart. Rising highs and rising lows mean an uptrend, falling ones mean a downtrend, and neither means the price is stuck in a range.

EUR/USD is ranging rather than trending cleanly. Buyers have repeatedly defended 1.1565 to 1.1585, while sellers have blocked advances between 1.1675 and 1.1711. A simple example is that the pair keeps bouncing near 1.1570 but struggles when it approaches 1.1700. Neither side has lasting control.

Support and resistanceiPrices where buyers have stepped in before, and prices where sellers have. A price often stalls or turns at these.

Initial support is 1.1585 to 1.1565, which is 29 to 49 pips below the current price, or 0.25% to 0.42%. This area has been tested at least five times since 18 August. A daily close below it would expose 1.1500. Initial resistance is 1.1633 to 1.1645, which is 19 to 31 pips above the current price, or 0.16% to 0.27%. It includes the 200-day average and the 3 September high. Stronger resistance is 1.1675 to 1.1711, which is 61 to 97 pips higher, or 0.53% to 0.84%. That upper zone was tested repeatedly between 19 and 26 August.

VolumeiWhether trading is picking up or dying down. Rising volume behind a price move means more people agree with it.

Abnormal. Spot forex has no central global volume figure. CME September Euro FX futures recorded 185,103 contracts on 4 September. The contract expires on 14 September, so rollover activity reduces its usefulness as a pure direction signal. Participation was substantial, but it did not confirm a decisive breakout.

RSI and momentumiWhether the price has been rising or falling hard lately, and whether that push is getting stronger or running out.

RSI is 56.9 on the daily chart. RSI measures how strongly price has risen or fallen over recent periods. A reading near 50 is balanced, while readings above 70 or below 30 can indicate stretched momentum. Current momentum is Neutral. It leans slightly upward but is not overbought and shows no confirmed major divergence.

Moving averagesiThe average price over the last 20, 50, 100 and 200 days. Trading above them is generally a healthy sign, below them a weak one.

A moving average is the average closing rate over a chosen number of days. The 20-day average is 1.1608, the 50-day is 1.1506, the 100-day is approximately 1.1533 and the 200-day is 1.1633. Price is 6 pips, or 0.05%, above the 20-day average. It is 108 pips, or 0.93%, above the 50-day average. It is 81 pips, or 0.70%, above the 100-day average. It is 19 pips, or 0.16%, below the 200-day average. I cannot confirm the current slope of every average or a reliable recent daily crossover.

VolatilityiHow much this pair swings day to day right now, compared with how much it usually swings.

Low relative to the pair's history. The 14-day average true range is 52.1 pips, which is 0.45% of 1.1614. Average true range measures the normal daily price movement. Twenty-day realised volatility is in the eighth percentile of its history. I cannot confirm a reliable event-specific implied-volatility figure from the options market. Low realised volatility means your normal stop can be tighter, but the Fed event can quickly produce movement larger than an ordinary day.

Breakout and breakdown levels

A decisive daily close below 1.1565, 49 pips or 0.42% lower, would confirm a breakdown and open 1.1500, which is 114 pips or 0.98% below the current rate. A close above 1.1711, 97 pips or 0.84% higher, would confirm a bullish breakout and open 1.1800, which is 186 pips or 1.60% higher.

Technical biasiWhat the chart alone suggests, ignoring the news. Rated Bullish, Neutral or Bearish.

Neutral. Price is above the 20, 50 and 100-day averages, but below the 200-day average. It also remains trapped between established support and resistance. This disagrees with my negative catalyst direction. I give more weight to the Fed decision because a genuine rate surprise can break the existing range.

What would invalidate this biasiThe price level or chart change that would prove the technical read wrong.

A daily close above 1.1711 would invalidate the neutral-to-bearish event setup. I would then conclude that buyers have taken control and would avoid selling unless price falls back below 1.1645.

Interest rate differential

The Federal Reserve target range is 3.50% to 3.75%, with a 3.625% midpoint. The ECB deposit rate is 2.25%. The current midpoint gap is 1.375 percentage points, or 137.5 basis points, in favour of the US dollar. If the ECB raises to 2.50% and the Fed holds, the gap narrows to 112.5 basis points. If both raise by 25 basis points, the gap remains 137.5 basis points. All else equal, investors prefer the currency that pays more interest.

Central bank biasiWhether the first currency's central bank is leaning toward higher rates, which is hawkish, or lower ones, which is dovish, compared with the second's.

The Fed is Hawkish based on its 29 July statement, three votes for a hike and its commitment to reduce elevated inflation. Governor Waller's 3 September comments introduced a softer condition, stating that improving inflation could justify a hold. The ECB is also Hawkish after its June increase, July hold and concern about energy-driven inflation. The relative stance is Neutral because both banks are considering tighter policy, although the dollar retains the higher current rate.

Expected rate cuts and hikes

Markets price a 58.4% probability of a 25 basis point Fed hike on 16 September. For the ECB, markets priced about an 88.6% probability of a 25 basis point increase on 10 September. The ECB move has less room to surprise because it is much more fully priced. The Fed has more repricing potential because the market remains divided. These probabilities come from prices in short-term interest-rate futures and swaps.

Bond yield differential

The US two-year Treasury yield was 4.34% on 4 September, compared with approximately 2.93% for Germany's two-year federal security. The 141 basis point spread favours the US dollar. The US ten-year yield was 4.77%, compared with about 3.34% for Germany, a spread of 143 basis points in favour of the dollar. A basis point is one hundredth of one percentage point. The short-term spread is the most important for this event because it reacts directly to expected central-bank policy.

Inflation trendiWhether price rises are speeding up, holding steady, or slowing down.

Inflation pressure is Rising overall, although core measures are more stable. US headline CPI was 3.4% year over year in July, with core CPI at 2.5%. Euro-area headline inflation increased from 2.9% in July to an estimated 3.3% in August, while core inflation was 2.4%. The similar core readings mean the main difference is the Fed's higher current rate and the response each bank gives to energy inflation.

Economic growth trend

Stable on a relative basis. US real GDP grew at a 1.5% annualised rate in the second quarter, down from 2.1% in the first quarter. Euro-area GDP grew 0.4% quarter over quarter, equal to roughly 1.6% when simply annualised. Both economies are expanding slowly, with no large relative growth advantage at present.

Risk sentimentiWhether investors are feeling brave or frightened. When they are frightened, money tends to move toward the dollar, the yen and the Swiss franc.

Neutral. On 4 September the S&P 500 fell 0.38%, the Nasdaq fell 0.29% and the VIX volatility index was 14.53. European and Asian equity performance was mixed. A VIX near 15 indicates limited market fear. A sudden risk-off shift would normally support the US dollar, adding downside pressure to EUR/USD.

Market positioning

Short-heavy, but not uniformly crowded. Leveraged funds were net short 38,173 Euro FX futures contracts on 1 September, equal to 4.4% of open interest. Large speculators were net short 24,925 contracts. Asset managers remained heavily net long, so institutional positioning is divided. A Fed hold could therefore produce a fast short squeeze in EUR/USD.

Carry trade attractiveness

Unattractive for holding EUR/USD long. A carry trade earns the difference between the two interest rates, but it can lose money quickly when the exchange rate moves against you. The dollar currently pays more than the euro. Even after an expected ECB increase, the US rate advantage should remain meaningful.

Core inflation pressure

Normal. US core CPI was 2.5% year over year in July. Euro-area core inflation was an estimated 2.4% in August. Both remain above the central banks' 2% goals, but neither shows the same acceleration as headline energy inflation. The US result on 11 September will be decisive. A monthly core reading at or above 0.3% would strengthen the case for a Fed hike, while 0.1% or lower would support a hold.

Wage pressure

Normal. US average hourly earnings rose 0.3% in August and 3.1% over the year, the slowest annual pace since May 2021. Euro-area hourly labour costs increased 3.1% year over year in the second quarter. Wage growth is still positive on both sides but is not clearly accelerating. This weakens the case for repeated rate increases after September.

Labour market strength

Strong in the United States relative to recent fears. August payrolls increased by 162,000, unemployment held at 4.1%, the workweek rose to 34.4 hours and June and July payrolls were revised upward by a combined 55,000. Euro-area unemployment was 6.3% in June and employment increased only 0.1% during the second quarter. The relative employment surprise favours the US dollar, although slower US wage growth gives the Fed room to wait.