EUR/USD has reversed direction following the euro’s huge gains on Wednesday. The euro jumped following the release of the FOMC’s most recent policy meeting, which showed that Federal policymakers were divided over tapering QE. The dollar continues to post modest gains in Friday trading, as the pair trades around 1.3040 in the European session. In economic news, US Unemployment Claims disappointed, coming in well above expectations. On Friday, Eurozone Industrial Production looked weak, posting a four-month low. In the US, the week wraps up with two key releases – PPI and UoM Consumer Sentiment.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
Asian session: EUR/USD was very quiet, in contrast to the previous Asian session. The pair touched a low of 1.3074 and consolidated at 1.3077. In the European session, Euro/dollar has dropped to the 1.3040 level.
Bernanke more dovish about QE tapering : US employment numbers have looked good recently, so much so that there was a lot of talk about the Federal Reserve tapering QE sometime in 2013. However, Thursday’s release of the FOMC minutes pointed to a split amongst Fed policymakers whether to maintain QE or scale down the bond-purchasing program. Fed chair Bernanke sounded cooler about QE tapering than he did in June, and stated that unemployment would have to drop to 6.5% before the Fed made a move. The markets reacted quickly to these developments, and the US dollar was broadly weaker as a result. Meanwhile, Unemployment Claims disappointed on Thursday, coming in at 360 thousand, well above the estimate of 342 thousand.
ECB says low rates to continue: The ECB continues to send out signals that interest rates will be maintained or even cut. On Thursday, the ECB stated in its monthly bulletin that it expects rates to be maintained over even lowered, but remained “flexible” about its low rate policy, with inflation being a key factor in any future moves. ECB policymaker Jens Weidmann echoed these sentiments. saying that the ECB’s monetary policy depended on economic conditions in the Eurozone.
Kenny Fisher - Senior Writer
A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.
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