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EUR/USD rebounds from three-month low following FOMC minutes

currency-newsEUR/USD rebounds from three-month low following FOMC minutes
The US dollar fell back on Wednesday, after the minutes from the Federal Reserve’s latest policy meeting were more cautious than expected.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR sliding to €1.1665 and GBP/USD retreating to $1.3768. GBP/CAD has climbed to C$1.7275, while GBP/AUD and GBP/NZD rally to AU$1.8514 and NZ$1.9756 respectively.

Coming up, a dovish change to the European Central Bank (ECB) mandate following its strategic review weaken the euro today?

What’s been happening?

The US dollar opened yesterday’s session on solid footing, with investors favouring the safe-haven currency amidst a prevailing risk-off mood and strengthening US Treasury yields.

However, the ‘greenback’ was forced to relinquish a good portion of the day’s gains, following the publication of the minutes from the Federal Open Market Committee’s (FOMC) June policy meeting.

The minutes revealed that several policymakers see elevated uncertainty in the US economic outlook and favour the Federal Reserve leaving its stimulus programme untouched as a result.

This dip in the US dollar reflected well on the euro as a result of the strong negative correlation between the pairing.

This allowed the EUR/USD exchange rate to rebound from a three-month low, after a surprise contraction in German industrial production undermined the single currency at the start of the European session.

At the same time, the pound was placed on the defensive on Wednesday, amidst concerns a sharp rise in coronavirus cases over the summer, coupled with the current self-isolation rules could stifle the UK’s economic recovery.

What’s coming up?

Turning to today’s session, a key focus is likely to be the publication of the results from the ECB’s strategic review.

Analysts expected the bank will alter its mandate by raising their inflation target to above 2%, a move which could weaken the euro.

The publication of last week’s initial jobless claims will be in the spotlight for USD investors today. Will another fall in new claims help to strengthen the US dollar later this afternoon?

Meanwhile, in the absence of any notable UK economic data, movement in the pound is likely to continue to be driven by domestic coronavirus developments.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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