EUR/USD has been advancing as the dollar pares some of its Fed-related gains but US consumer sentiment and coronavirus headlines from Europe may reverse the recovery, in the opinion of FXStreet’s analyst Yohay Elam.
“The Fed signaled no rate rises through 2023 – but also no imminent action despite rising uncertainty about the outlook. Federal Reserve Chairman Jerome Powell also indicated that policymakers would be wise to act – adding fiscal stimulus.”
“It seems that Republicans and Democrats seem to be making some progress toward agreeing on a new relief package. Nevertheless, there is still no white smoke above Capitol Hill, potentially as politicians have little incentive to compromise ahead of the elections. Failure to boost the economy could trigger further flows into the greenback.”
“Looking at the old continent, there are is a good reason to expect the euro to fall. Coronavirus cases continue rising rapidly in Spain, France, and even Germany and Austria – countries that initially coped well with coronavirus.”
“Later on Friday, investors will be looking at the University of Michigan's preliminary Consumer Sentiment Index for September. A minor advance is expected yet the disappointing retail sales figures for August imply that consumers may be struggling. The withdrawal of emergency government support is limiting the recovery in consumption.”
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