EURUSD edged out a fresh two-month low at 1.0994, racking up today as the sixth consecutive trading day where a lower low has been seen. The new low is the culmination of a moderate downtrend that’s been unfolding over the last couple of weeks, from levels above 1.1150. The Dollar has been outperforming the common currency in the context of rising risk aversion in global markets, while ECB policymakers have been signalling that accommodative monetary policy will remain in place for the foreseeable future given economic risks. ECB’s Rehn said earlier that the monetary arsenal hasn’t been exhausted yet.
The Dollar, meanwhile, is currently registering as the strongest of the main currencies on the year-to-date, reflecting international demand for Treasuries (the Dollar is up by 3.9% versus the Aussie dollar, which is the weakest, closely followed by the Kiwi dollar (3.0%) and is showing a near 0.5% gain on the Yen, which is the second strongest).
In the bigger picture, the EURUSD has been trending lower since early 2018, dropping from levels near 1.2500 and posting a 32-month low at 1.0879 in early October, the current nadir of the trend. Momentum has faded, however, with the Fed having backed out of its tightening phase after hiking rates three times last year. The central bank has since been engaged in capping the repo rate, which has seen its balance swell by some 11% since last September, and Fed funds futures are discounting about 72% odds for a 25 bp easing at the last FOMC meeting of the year in December, after the US Presidential election (which the markets are assuming will see Mr. Trump back in the White House).
The FOMC will issue its post-meeting statement at 19:00 GMT later today. There is no reason to expect a change in the fed funds target range of 1.50%-1.75%. Data released since the December meeting did little to change the Fed’s commitment to a policy pause until we see a “material change” in the outlook. The statement and press conference will be monitored closely for any remaining tilt in the Fed’s policy toward easing. Expectations are that the Fed will refrain from signaling further action, either in the statement or the ensuing (19:30) press conference. As ever, nuances and inferences from Jay Powell will be closely followed by market participants, commentators and of course, President Trump.
Click here to access the HotForex Economic Calendar
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.