EUR/USD has bounced off the lows and trades close to the three-month highs, sitting at 1.1367. A big breakout above 1.14 is probable as there are three reasons why the Fed will likely continue boosting markets and weighing on the dollar, according to FXStreet’s analyst Yohay Elam.
Key quotes
“The Fed may hint that it is returning to traditional QE, yield-curve control, or ‘Operation Twist’ – buying longer-dated debt to keep yields depressed. That may weigh on the greenback.”
“The Fed announces its decision after two weeks of protests against racial discrimination. While the Non-Farm Payrolls report showed that the unemployment rate dropped from 14.7% to 13.3%, it remains higher for blacks and Hispanics. That may prompt policymakers – including at the Fed – to favor looser monetary policy despite the overall improvement.”
“Powell admitted to crossing red lines, and he may have referred to buying junk bonds, open-ended QE, and other moves. However, the bank would not like to ruin the party and turn the rally into a plunge. The Fed will likely try to walk a fine line between supporting the economy and warning about bubble risks, but it would prefer to err on the side of too much accommodation rather than too little, at least for now.”
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