EUR/USD Outlook Remains Neutral After the Fed Meeting

Markets pullback after Fed meeting, Eyes on Bank of England rates decision.

The New Zealand economy shrunk in Q2 by -12.4% the read came in better than the expected -13.3%. The Australian unemployment figures of 6.8% came in lower than expected of % 7.7% and lower than the prior read of 7.5%.

The Bank of Japan has kept interest rates unchanged on Thursday at -0.1% and maintained -as expected- ultraloose policy to help the economy and facilitate fundraising by struggling companies.

The European inflation numbers for August came in line with expectations at -0.2% but lower than the prior print of 0.4%.

Equities

Global stock markets retreated due to lower hopes of more stimulus from the US Fed. The US central bank explained that it could not create demand and pushing the economy forward required fiscal stimulus which may take place after the US elections.

Currencies

The Federal Reserve has left the monetary policy unchanged and possibly keeping on low-interest rates until 2024 according to the Fed dot plot. Additionally, the central bank signaled concerns that the pandemic will continue to affect the economy negatively. The US Dollar index rallied on Thursday to a one-week high at 93.61 however, the price slipped after and remained to trade in a sideways move.

The Euro has softened due to the US dollar strength on Thursday however, EUR/USD technical outlook remains neutral while below 1.1909.

GBP/USD has recovered this week some of last week’s losses caused by Johnson’s controversial internal market bill that breaches in part of it the UK commitments in the EU/UK exit treaty. Joe Biden the Democrat candidate to the US elections warned the UK that it must honor its international commitment with the EU or there would be no trade deal with the US. From a point of view, a close below 1.2773 would change Cable’s outlook to negative.

Commodities

The oil price traded lower on Thursday due to reports of US producers prepared to resume production. The US Crude dropped by 0.2% while Brent oil lost around 0.1% of its value.

The Gold price steadied and continued its sideways move the price may keep pointing higher towards $2,015. While a daily close below $1,921 could change the yellow metal outlook to negative.

Looking Ahead

On Thursday, markets will find out more about the UK monetary policy from the Bank of England meeting at 3:00 PM (UAE time) then at 4:30 PM come the US initial jobless claims.

The Fed Dot Plot Diagram September 16-2020

Diagram source: The Federal Reserve Projection Materials