- EUR/USD will bounce off YTD lows near 0.9800 as price action drags out.
- Sentiment remains negative, although it failed to support the dollar.
- US jobless claims were better than expected, while EU consumer confidence disappointed.
The shared currency is almost flat after hitting a new YTD low of 0.9806 following the Fed’s September interest rate decision. The central bank further confirmed an aggressive stance, with most policymakers expecting another increase in the federal funds rate; therefore, interest rate differentials between the EU and the US are a headwind for EUR/USD.
EUR/USD started trading at daily lows and reached a daily high of 0.9907 before paring those gains and settling around current spot prices. At the time of writing this article EUR/USD is trading to 0.9842, which means minimum gains of 0.03%.
EUR/USD partially recovers amid weak dollar
Global stocks remain under pressure after Fed Chairman Powell and Co rates. The US Labor Department reported that Initial Jobless Claims for the week ended September 17 rose by 213,000 below the forecast of 217,000, pointing to a “very tight” labor market, as Chairman Powell put it in a post-Fed press statement on Wednesday.
Meantime, US dollar index erasing some of its earlier gains, down 0.09% to 111.347, a tailwind for EUR/USD. Conversely, the 10-year U.S. Treasury yield remains positive, up as high as 3.682%, gaining 14 basis points after hitting an 11-year high of around 3.71%.
Meanwhile, EU consumer confidence fell to -28.8 in September, adding to an already deteriorating economic scenario in the Eurozone, beating estimates of -25.0. meantime, ECB Governing Council member Isabel Schnabel noted that inflation is still too high, so further rate hikes will be needed. She did not admit a recession in the eurozone, but warned that one may be inevitable in Germany.
What to watch
The EU calendar will include a tranche of S&P global PMIs for Spain, France, Germany and the Eurozone. On the US front, the US S&P Global PMI will also be reported, along with Fed Chair Jerome Powell’s speech at around 18:00 GMT.