- EUR/USD erases gains seen during the Asian trading hours.
- Dollar picks up a bid as stocks drop on growth concerns.
- Fed sees long recovery ahead, predicts no change in interest rates through 2022.
The weak tone in the global stock markets is again boding well for the US dollar and pushing EUR/USD lower.
At press time, the pair is trading in the red near 1.1360, having put in a high of 1.1395 during the Asian trading hours. The currency pair faced rejection at 1.1422 on Wednesday.
Stocks drop
Asian stocks and the US and European equity futures are reporting modest declines on Thursday, possibly due to renewed concerns about the US economy.
Federal Reserve’s (Fed) officials, at their policy meeting on Wednesday, projecting the economy to contract by 6.5% in 2020 and the unemployment rate to be 9.3% at the end of the year.
More importantly, the Fed’s President said that it could take years to recover the massive job losses witnessed over the past three months, pouring cold water over the optimism generated by last Friday’s stellar Nonfarm Payrolls report.
As a result, the dollar is drawing haven bids against EUR and growth-linked currencies like the AUD and NZD. Meanwhile, the anti-risk yen is gaining ground against the greenback. The FX market action is reflective of classic risk-off trading.
Looking ahead, the focus is likely to remain on the equity markets, as the Eurozone data calendar is light. EUR/USD may see a deeper correction as signaled by technical charts if the stock market sentiment fails to improve during the European and American trading hours.
Technical levels
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