EUR/USD drops like a stone as the bearish FOMC minutes are digested

• EUR/USD is under pressure as the greenback continues its correction the day following FOMC minutes
• The FOMC is clearly concerned for the US economic recovery’s trajectory, weighing on risk sentiment and the stock market.

EUR/USD has spiked to the downside on the Federal Open Market Committee Minutes which have highlighted that a ‘ highly accommodative stance of monetary policy likely needed for some time’.

However, that has not prevented the greenback from tearing through the forex space to fresh recovery highs in the DXY at 92.94.

A mixed and confused FOMC sends stocks off a cliff, supporting the DXY

The minutes have not offered much in the way firm guidance, but they have eluded to the idea that yield caps would only provide ‘modest benefits in the current environment’, which has given US yields a boost, supportive of the greenback.

A the time of writing, EUR/USD is trading at 1.1832, 2 pips from its lows and is down from a 1.1952 high on the day.

The minutes have also shown that the FOMC is concerned about the road to recovery and some members suggested that additional accommodation could be required to promote the economic recovery or return inflation to 2%.

The minutes showed that ”participants noted risks included additional waves of virus spread that could cause credit markets to tighten again as well as loss of fiscal support for households, business and local government.”

The greenback is collecting a possible safe haven bid here as the correlation of precious metals and the US stock market sees both assets classes tumbling.

Spot gold is down 3% and the SPX is down 0.17%.

The euro is also correlated to such a move in said markets, boosting the DXY to fresh corrective highs. 

EUR/USD levels