Contest Trader

Don't miss the chance to cash-in prizes totaling

$10.000
Register here for the Ultimate demo trading competition

EUR/USD Price Trend Hinges on Upcoming Monetary Policy Updates

EUR/USD Price Trend Hinges on Upcoming Monetary Policy Updates

Markets edged lower on the Fed and the ECB Chairs’ statements and the British Pound remains stable.

Help is Still Needed

The US Consumer spending softened in October and could weaken further due to higher COVID-19 infections and lower-income, as millions of Americans will lose benefits in December amid the Congress gridlock on a new fiscal stimulus package.

The President-elect Joe Biden urged the US Congress on Tuesday to approve the fiscal package swiftly. However, this is unlikely to happen before the new administration takes charge at the start of 2021 therefore, pressures mounted on the Fed to inject more liquidity in the economy.

The US 10 years treasury yield slipped by 5% on Tuesday on the Fed Chairman's statement that “there was still a long way to go before the economy recovers from the pandemic”. Powell said that the central bank was ready to use every tool to reduce unemployment and to help inflation levels to grow sustainably nonetheless, he called for an easier fiscal policy.

Stronger Recovery in the Second half of 2021

The market cheered the vaccine updates; however, investors know that it may take longer to roll over the vaccine considering some hardships that could slow down the distribution process. Therefore, the likelihood of easing current restrictions in the first quarter of 2021 remains slim.

This trend was strengthened by the ECB President's statements on Tuesday, Miss. Lagarde said that the first half of 2021 will be difficult, and catching up with pre-pandemic levels will not happen before the end of the year. Based on the above most global stock markets slipped on Tuesday and closed in the red.

Stock Market

Change %

S&P 500

- 0.4%

Dow Jones

-0.4%

NASDQ

-0.5%

Japan 225

-0.8%

DAX 30

+0.08%

FTSE 100

-0.9%

CAC 40

+0.3%

EUR/USD and Main FX Markets

The greenback softened with the 10-year treasury yield on Tuesday hence, the US Dollar index could retreat further for a test of the September 1 low at 91.72.

The EUR/USD may remain stable below 1.1909 until the upcoming ECB meeting on December 10. Investors are interested to know how the central bank will help the Eurozone’s economic recovery.

The GBP/USD rallied on Tuesday eyeing a test of the 1.3300 level on news of a possible EU-UK trade deal to be achieved in early next week. The pair keeps its positive outlook while above 1.3185.

Gold and Oil

The oil price stabilized on news of better compliance from the OPEC+ members and a possible extension of the current production cut to beyond January 2021. The Brent Crude remained trading above 43.58 keeping its chances, for the moment, to rally towards 46.50

The Gold slipped on Tuesday by 0.3% but remained above $1,861 keeping its neutral outlook. Therefore, the price may push for a test of $1,921/oz.

Looking Ahead

EUR/USD traders will follow the Eurozone inflation rates of October at 11:00 AM (GMT) and Canadian inflation numbers of October at 2:30 PM. Later on, the market will find out about the change in the US oil stockpiles at 4:30 then tune in the Fed members Williams and Bullard speeches at 6:15 and 19:20 respectively.

This information/research prepared by Mahmoud Alkudsi does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk. The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest. The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.