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EUR/USD stumbles to four-month low on hawkish Fed commentary

currency-newsEUR/USD stumbles to four-month low on hawkish Fed commentary
The US dollar struck higher on Monday, rallying on the back of some hawkish remarks from a Federal Reserve policymaker.

Meanwhile, the pound is struck in a narrow range so far this morning, with GBP/EUR flat at €1.1798 and GBP/USD muted at $1.3844. GBP/CAD is subdued at C$1.7397, while GBP/AUD and GBP/NZD hold steady at AU$1.8867 and NZ$1.9826 respectively.

Coming up, will another drop in German economic sentiment send the euro lower this morning?

What’s been happening?

The US dollar traded in a wide range at the start of this week’s session, but ultimately was able to close Monday higher.

Fluctuating US Treasury yields stoked some volatility in USD exchange rates through the European trading session.

However, the ‘greenback’ then caught some tailwinds on the back of comments from Federal Reserve policymaker, Raphael Bostic, who suggested the Fed could start to taper its asset purchases in the last quarter of 2021.

The euro, meanwhile, was pressured by its strong negative correlation with the US dollar.

The single currency was also undermined by the by the Eurozone’s latest Sentix economic optimism index, which dropped to a three-month low in August.

At the same time, the pound remained mostly rangebound yesterday, as while Scotland’s lifting of its final lockdown measures was welcomed by GBP investor, a modest rise in UK coronavirus cases limited the upside potential of the pound.

What’s coming up?

Looking ahead, the primary focus this morning will no doubt be on the publication of Germany's latest ZEW economic sentiment index.

This month’s survey is expected to report that morale in the Eurozone’s largest economy continued to deteriorate, with analysts predicting the index will have fallen to its worst levels since December, potentially piling fresh pressure on the euro.

In the meantime, the continued absence of any notable UK data releases is likely to leave GBP investors to focus on domestic coronavirus developments as new cases continue to creep higher.

Finally, movement in the US dollar could prove limited today as USD investors brace for Wednesday’s consumer price index.
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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