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The euro reacted to the ECB’s concerns dropping to levels around 1.18 and that move may have reached its limits. US data is next to determine EUR/USD’s direction, Yohay Elam, ana analyst at FXStreet, reports.

Key quotes

“The recent rise in the euro is ‘always worrisome when you have weak demand’ – the words of unnamed officials at the European Central Bank quoted in the Financial Times are weighing on the common currency.”

“Tension is mounting around the upcoming meeting of the ECB next week, where Lagarde will likely be asked about the value of the euro and any policy measures to address its strength.” 

“Thursday’s figures are already of higher interest. Weekly initial jobless claims for the week ending August 24 are set to drop below one million once again, pointed to gradual improvement. More importantly, the ISM Services Purchasing Managers’ Index is the last clue ahead of Friday’s Non-Farm Payrolls report. Economists expect a drop in the headline Services PMI and also a collapse in the employment component. Projections may be too downbeat, lowering the bar for an upside surprise.” 

“Stock markets have been extending their uptrend, partially powered by hopes for a COVID-19 vaccine to come as early as next month in some US states. The urge to distribute the treatment raises concerns of political interfering ahead of the elections. Nevertheless, any positive development could boost equities and weigh on the safe-haven dollar.” 

“Washington announced movement limitations on Chinese diplomats, retaliating for a similar move by Beijing. Worsening relations between the world’s largest economies could boost the greenback.”

 

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