EUR/USD has been edging lower, as the pair is retreating from the mid-1.1800s reached on Tuesday to trade around 1.1820, down 0.1% on the day. Speculation about Powell’s speech is the primary driver, with several sideshows also having their say such as Covid-19 developments and US-China relations, FXStreet’s analyst Yohay Elam briefs.
Key quotes
“AIT – the new three-letter acronym that promises to down the dollar is not here yet, and the greenback is paring back its losses. AIT stands for Average Inflation Targeting – a new policy framework that will allow the Federal Reserve to surpass 2% for one year in order to compensate for weak inflation beforehand. The new framework means keeping interest rates lower for longer – thus weakening the dollar. Speculation about this long-term change had been weighing on the greenback but may have reached its limit.”
“The ‘fiscal cliff’ that America experienced at the end of July – when federal unemployment benefits and other programs lapsed – could be taking its toll on sentiment.”
“The US COVID-19 case curve continues its encouraging fall while deaths remain elevated, still around 1,000 per day. President Trump will meet medical professionals later on Wednesday. He is keen to see a vaccine before the elections. Infections are on the rise in Europe, with Spain at the forefront. Governments are reluctant to impose wide lockdowns and opt for localized measures so far. Things may change when temperatures drop and hospitals will encounter both flu and COVID-19 patients.”
“Sino-American relations remain calm as China will reportedly buy a record amount of soybeans in 2020. While the world’s largest economies are clashing on many fronts, they are aligned on trade relations – at least for now.”
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