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EUR/USD is holding onto most gains as markets cheer coronavirus vaccine promises. The Fed’s dovish shift and eurozone inflation figures are set to move the pair as August draws to an end, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“The Federal Reserve’s dovish shift continues weighing on the dollar. The world’s most powerful central bank will allow inflation to overheat and employment gains to materialize before raising rates. After an initial choppy reaction to the announcement, the narrative of a weaker dollar took hold and is unlikely to change anytime soon.”

“Will ECB President Christine Lagarde follow the footsteps of her American colleague Jerome Powell? Even if the inflation hawks at the German hawks sign off a shift to allow higher consumer prices – highly unlikely – inflation remains depressed. Preliminary Consumer Price Index figures for August are due out throughout the European morning and are set to show that inflation is going nowhere fast i staying far from the ECB’s 2% target.” 

“Another reason to shy away from the greenback stems from hopes for developing a coronavirus vaccine. The US Food and Drugs Administration (FDA) said it is ready to fast-track such immunization if benefits outweigh the risks. China’s Sinovac has already received authorization for a COVID-19 vaccine that will be administered to high-risk patients. Optimism about a solution is pushing stocks higher and diminishing demand for the safe-haven dollar.” 

“Coronavirus cases continue rising in the old continent, with French officials sounding more concerned than beforehand and Spain’s situation worrying investors as well. For now, the deterioration still seems under control and does not hurt the euro. That may change, but probably not anytime soon. On the other side of the pond, US COVID-19 cases have topped six million, but are on a downtrend. Mortalities are still high, with nearly 1,000 Americans losing their lives on average every day, but as long as there is no deterioration, investors seem calm.”



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