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  • EUR/USD did not see too much reaction to the recently released FOMC minutes and continues to trade just to the north of 1.1900.
  • The minutes show the Fed maintaining optionality regarding tweaks to its QE programme, which may reinforce expectations for action in December.

EUR/USD continues to trade not too far below high of the day and comfortably above the 1.1900 marks in wake of the release of the FOMC minutes from the 4-5 November meeting, which did not trigger a meaningful market reaction. On the day, the pair trades with gains of more than 20 pips or around 0.2%.

EUR/USD unresponsive to FOMC minutes

The minutes of the 4-5 November FOMC meeting were just released and did little to spur a market reaction. At the November FOMC meeting, members maintained optionality on future changes to its asset purchase programme, the topic of which has been the main focus of markets as of late, saying that it could tweak the pace, maturity or duration of purchases going forward. Many members favoured enhanced bond-buying guidance fairly soon, while “several” others expressed concerns that a significant expansion in asset holdings could have unintended consequences.

While the minutes are now out of date, given that the meeting happened before this month’s positive vaccine news, by choosing to maintain optionality regarding tweaks to its QE programme the Fed may be bolstering expectations for action at the December meeting. This, in line with the more dovish tone taken by FOMC members as of late (given the lack of fiscal stimulus and rising virus cases), is likely to weigh on USD going forward.

Turning to the ECB; both ECB Governing Council Member Yves Mersch and ECB Vice President Luis de Guindos spoke on Wednesday. Mersch gave the nod to an expansion of the PEPP and TLTROs in December, as practically all other ECB members have thus far done, while de Guindos noted that stimulus options are being calibrated in view of the recent rally in crude oil prices as well as recent good news regarding Covid-19 vaccines.

Both of these are hawkish developments as far as the ECB is concerned, and de Guindos’ comments on Wednesday ought to serve as a warning for markets that the ECB might not be quite as inclined to over-deliver on the stimulus front in December as they perhaps were back at the end of October.

EUR/USD battles to close above monthly high

EUR/USD is currently fighting a battle to close above the previous monthly high at 1.1919. If it can, that would be a bullish signal that a move towards August highs above 1.1950, and then even on to 1.2000 might be next. Failure to do so sends the signal that perhaps a retest of the top of the pair’s recent low-1.1800s to upper-1.1800s range is more likely in the near future.

EUR/USD eight hour chart

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