EUR/USD bulls take back the baton, probing key territory in the 1.1850s
- EUR/USD bulls back in charge as the greenback falls stumbles onto the backfoot.
- ECB and Fed both highly uncertain about the path of economic recoveries.
EUR/USD is currently trading at 1.1885 between a low of 1.1802 and a high of 1.1868. Whatever bullish tilt the US dollar may have adopted following a less than dovish Federal Open Market Committee minutes released on Wednesday, the balance has moved back in favour of the bears on Thursday.
Both the Federal Reserve and the European Central Bank have been in the limelight this week, with both minutes failing to offer any continuity of positive growth outlooks, instead portraying a high uncertainty among the board of members.
The resurgence of COVID-19 cases in Europe, investors are turning less bearish on the greenback which was looking down to the bottom of the abyss at 27-month lows before Thursday’s rally.
Firstly, the FOMC minutes of the Fed’s late July meeting stopped short of signalling an imminent shift to put a lid on Treasury yields or allowing inflation to run hotter. This outcome sent yields higher and prompted flows back into the greenback in a market heavily short of the US dollar.
Meanwhile, the minutes of the ECB’s July meeting proves that the ECB does not have any exclusive insights with the word “uncertainty” appearing 20 times in the minutes.
The ECB noted that “it was important to emphasise that, although economic activity was gaining momentum, there was no room for complacency.”
The main takeaway is that no matter if there is a bounce-back in economic activity, the recovery path will be highly uncertain and that the current monetary stance is here to stay for a while.
Dollar stumble son the back foot again
Nevertheless, we have seen the greenback fall to the wayside again on Thursday.
From dropping below $1.19 and being on the verge of breaking below 1.1800, New York bulls went in for the kill on Thursday, buying up the euro at a discount and taking it back to current session highs in the 1.1850s.
Dollar weakness could, in part, could be attributed to the Weekly US Jobless Claims on Thursday that once again was surging to over 1 million, helping the dollar solidify gains it made on Wednesday.
The Labor Department reported on Thursday that the number of Americans filing a new claim for unemployment benefits rose unexpectedly to 1.106 million for the week ended Aug. 15, from the 971,000 the week before.
The previous week's level had marked the first time since March that new claims had registered below 1 million.
EUR/USD levels