Investing.com -- EUR/USD fell sharply on Wednesday slumping to a fresh two-month low, after the Federal Open Market Committee held short-term interest rates at its current near-zero during its October monetary policy meeting.
The Federal Reserve also sent strong indications that a rate hike will be on the table in mid-December when it meets next after a break next month. The hawkish stance sent the euro tumbling against the dollar, as it fell below 1.09 for the first time since early-August. EUR/USD traded in a broad range between 1.0897 and 1.1095, before settling at 1.0924, down 0.0120 or 1.09% on the session. The euro has now closed lower against the dollar in five of the last seven sessions.
EUR/USD likely gained support at 1.0847, the low from Aug. 5 and was met with resistance at 1.1496, the high from Oct. 15.
Citing weakness in the labor market and moderate economic growth, the FOMC voted to leave its benchmark Federal Funds Rate at a target range between zero and 0.25%. The rate has remained at a zero-bound range for more than five years after the Federal Reserve introduced a wide range of monetary easing measures aimed at rescuing the economy from near collapse.
The FOMC voted 9-1 to leave the Federal Funds Rate unchanged, with Richmond Fed president Jeffrey Lacker serving as the lone dissenter. Lacker voted to increase the Federal Funds Rate by 0.25% at the meeting, reiterating the same position he took in September.
The FOMC also downplayed the impact of the global economic slowdown on its policy decision in a dramatic reversal from its position last month. In September, the Fed opted to leave rates unchanged, after blaming headwinds from a slowing global economy for placing downward pressure on inflation. While the FOMC said in the statement that it expects inflation to remain around its recent low levels in the near future, the Fed also anticipates that it will rise near its targeted goal of 2% on a longer-term basis.
The U.S. Department of Labor will release two additional U.S. national employment reports before the FOMC's December meeting, providing the Fed with enough data on the state of the U.S. labor market to help guide their decision. On Thursday, the Commerce Department will release advance estimates for U.S. GDP for the third quarter, one day before it issues a report on Personal Income and Outlays for the month of September. Core PCE inflation, the Fed's preferred gauge for price growth, inched up 0.1 to 1.3% in August.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 1% following the FOMC's release to an intraday high of 97.89. Before the release the index stood at 96.64, down 0.40% on the session.
A rate hike is viewed as bullish for the dollar, as foreign investors pile into the greenback to capitalize on higher yields.