EUR/USD has room to bounce as depressing developments are already in the price

EUR/USD was hit hard by President Donald Trump, who abruptly announced the end of stimulus talks with Democrats on Tuesday. Nevertheless, the euro is ready to recover from Trump's blow, according to FXStreet’s analyst Yohay Elam.

Key quotes

“The president seemed to be regretting his move. After seeing US markets close at lower ground, he tweeted his support helping airlines, payrolls protection, and sending stimulus checks to all Americans – with his name on signed on them. If negotiations resume, equities could rise and the safe-haven dollar could fall.”

“Vice-President Mike Pence, who leads the White House's COVID-19 taskforce, will debate VP-candidate and Senator Kamala Harris late in the day. With polls swinging strongly toward Biden, a calm performance by Pence could contribute to mean-reversion and a tighter race. Investors prefer a clear outcome and a larger fiscal relief package – something that a clean sweep for Democrats can provide. If Pence is seen as the winner, stocks could slide, and the safe-haven dollar could rise – but that happens only early on Thursday.” 

“Christine Lagarde, President of the European Central Bank, said on Tuesday that her institution does not target the exchange rate, reiterating known positions. She also expressed concerns about the recovery. Lagarde speaks again on Wednesday, but is unlikely to say anything new to weigh on the common currency – her worries are already priced in.”

“Jerome Powell, Chairman of the Federal Reserve, called on lawmakers to act and expressed fears about a slowing recovery in a speech on Tuesday. The Fed's meeting minutes, due out on Wednesday, will likely echo the same messages. In theory, the protocols only document the mid-September rate decision, but it is essential to note that the minutes are revised until the last moment to send a message to markets. In this case, the bank would not want to be seen as dropping a bombshell ahead of the vote.”