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EUR/USD is trading above 1.1730, retreating after the Fed but shrugging off weak German GDP. The pair could surge to new highs in response to US GDP data, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“The euro is showing its strength after Germany reported a fall of 10.1% quarterly in the second quarter, and -11.7% annually, both below expectations. Perhaps the common currency is benefiting from upbeat employment figures in Germany – the number of unemployed dropped by 18,000 compared with an expected increase.”

“Markets could be seeing through data related to the worst days of coronavirus and are encouraged by Europe’s emergence from the pandemic. While some countries are experiencing flareups, the situation is under control. That contrasts with the US, where the daily death toll continues rising, hitting a high of over 1,400. The caseload has stabilized yet at an elevated rate of around 70,000.” 

“The Fed left its policy unchanged but expressed concerns about the impact of the virus. Chairman Jerome Powell said that high-frequency data is showing economic softening since the coronavirus cases began rising in mid-June. While he committed to using all available tools, he was short on detail and left that to after the Fed completes a review process.”

“Weekly jobless claims are set to show an ongoing worrying situation in America’s labor market, but these figures will likely compete with the first read of GDP for the second quarter. Economists foresee a crash of 34.1% annualized – the worst on record. It is essential to note that estimates are within a broad range and high volatility is likely. Markets may shrug off an upbeat data or react negatively to adverse figures, assuming the weak second quarter is preceding an even worse third quarter.”