EUR/USD: Dollar remains bid on Fed's grim warning

  • EUR/USD appears poised to move lower after rejection at 1.09.
  • Powell's comments on the economy and negative rates continue to bode well for the US dollar.
  • US data is likely to show another 2.5 million workers filed for jobless claims in the week ended May 8.

The US dollar is extending overnight gains, sending EUR/USD lower amid risk-off action in the Asian stock markets. 

At press time, EUR/USD is trading under 1.0810, representing a 0.10% decline on the day, having dropped from 1.0896 to 1.0812 on Wednesday. Meanwhile, major Asian equity indices like South Korea's Kospi, Hong Kong's Hang Seng, and Australia's S&P/ASX 200 are flashing red. 

Prolonged slowdown

Investors are shunning risk and buying US dollars possibly due to renewed growth concerns. Federal Reserve's chairman warned on Wednesday that scope and speed of the ongoing economic downturn are without modern precedent, significantly worse than any recession since World War II. Powell warned that deeper and longer downturn may be seen if the Congress fails to provide additional fiscal support. 

As a result, the US stocks dropped and the US dollar picked up a bid. The decline in EUR/USD seen at press time is an extension of the overnight losses triggered by the broad-based demand for the greenback. 

Dollar's strength could be also be attributed to Powell's comment that the central bank is not looking at negative interest rates as an option. On Tuesday, the Fed fund futures contracts were pricing negative rates in June 2021. 

Eyes US data

The US Initial Jobless Claims, due at 12:30 GMT, is expected to show that 2.5 million people filed for first-time claims for state unemployment insurance in the week ended May 8. 

Risk aversion will likely worsen, sending EUR/USD lower if the data shows a bigger-than-expected rise in the jobless claims. That would validate Goldman Sachs' decision to raise its peak US jobless rate forecast to 25% from the previous estimate of 15%. 

The final German Consumer Price Index for April, scheduled for release at 06:00 GMT, could turn out to be a non-event for markets unless the number prints significantly below estimates. In that case, the EUR may face stronger selling pressure. 

Technical levels

    1. R3 1.0958
    2. R2 1.0927
    3. R1 1.0873
  1. PP 1.0842
    1. S1 1.0788
    2. S2 1.0757
    3. S3 1.0703


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD struggles around 1.21 amid sour market mood

EUR/USD has extended its falls and struggles around 1.21 as the risk-off mood and elevated US bond yields favor the dollar. President Biden's stimulus bill ran into a snag. The Fed's preferred inflation measure and end-of-month flows are eyed.


Gold melts below $1,750, lowest in 8 months amid high Treasury yields

Gold (XAU/USD) has been extending its downfall as elevated bond yields make the precious metal – which provides no returns – less attractive.

Gold news

S&P 500 Day Ahead Outlook: Inflation fears see bears back bashing

An ugly day for stock markets on Thursday as the dirty word inflation reared its head again. Just when you thought Powell had killed off the thought, it came back stronger in the sequel!

Read more

Bitcoin ready for bullish continuation as crypto bull cycle pauses

Bitcoin retest support at $45,000 after failing to break the resistance at $52,000. A break above the range between $48,000 and $49,500 will bring back a bullish impulse.

Read more

US Dollar Index remains firm around 90.60 post-data

The US Dollar Index (DXY), which gauges the buck vs. a basket of its main rivals, keeps the bid tone unchanged around 90.60 on Friday.

US Dollar Index News