Piet P. H. Christiansen, senior analyst at Danske Bank, points out that EUR/USD pair tested the 1.1250 level on a dovish Fed, which justified the dovish pricing heading into the meeting.

Key Quotes

“Fed Chair Powell stressed that the Fed is monitoring the trade talks and needs to see more weak data to pull the trigger. It means that the upcoming G20 meeting, along with upcoming key data releases, i.e. PMIs, ISM, non-farm payrolls etc., will be particularly important for the pricing of upcoming Fed meetings and hence for the direction of the USD.”

“We do not see data turning around for the better and see a risk of no breakthrough in trade talks before the next Fed meeting, which means that there is still upside potential for EUR/USD.”

“After two days of dovish central banks, we still see a strong case for a higher EUR/USD as the Fed is set to ease more than the ECB. We keep still look for EUR/USD to rise to 1.15 in 3M, although we note that despite large movements in rate markets, EUR/USD has so far had a difficult time breaking out of its long-held range close to 1.12.”

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