The Euro (EUR) came under pressure against the US dollar (USD) and pushed the EUR/USD lower during the European morning on Thursday. The Greenback remained steady amid increasing cautiousness before the Federal Reserve (Fed) Chair Jerome Powell’s event later in the European evening at 19:00 GMT. President Christine Lagarde will speak in Brussels at 17:30 GMT. Investors will closely watch both speeches for clues regarding the central banks’ direction and further policy tightening.
US dollar and the Fed
Without any important data releases and fundamental drivers, the drop in the US Treasury bond yields made it difficult for the dollar to recover further but held its ground in the European morning on Thursday after a moderate rebound in the 10-year US yield.
- US weekly initial jobless claims
The US weekly Initial Jobless Claims data will also draw attention. First-time applications for unemployment benefits in the US are forecast to reach 218,000, up from 217,000.
Although this data may not influence the pair significantly, the immediate reaction could affect the USD’s valuation. A reading close to 200,000 could strengthen the greenback, while a disappointing reading above 220,000 could weaken it. Indeed, if unemployment numbers rise, the weekly jobless claims could confirm the weaker US jobs report from last week and could weaken the dollar against most major currencies.
- Fed interest rates
Later, in the American session, Chairman Powell will talk at an International Monetary Fund (IMF) panel titled ‘Monetary policy challenges in a global economy.’ Markets have now priced in a 90% probability that the Fed will not tighten policy further in December. Following the recent FOMC meeting and the release of weaker-than-expected Nonfarm Payrolls data for October, the likelihood of an interest rate hike in December has receded. Market participants are now expecting the Fed to maintain its present monetary stance unchanged in the next few months.
However, if during his speech today, Powell mentions further policy tightening, and discusses strong economic activity and stubborn inflation, then the USD could push higher and weaken the EUR/USD pair.
Ahead of Fed Powel’s speech, Atlanta Federal Reserve President Raphael Bostic will release comments around 14:30 GMT and near 16:00 Thomas Barkin from the Richmond Federal Reserve branch will also make comments.
Euro and ECB
In the Eurozone, the European Central Bank (ECB) is also expected to remain on hold. However, hawkish comments from policymakers have left the door open to further tightening. In a newspaper interview on Thursday, European Central Bank (ECB) Vice President Luis de Guindos discussed interest rates and emphasised that “we are not there yet.” He added: “We have to be prudent and cautious, as there are some risks around the outlook for inflation over the next few months. Leading indicators point to the growth outlook being somewhat more negative than we previously projected.”