- Euro loses strength after ECB emergency meeting.
- The dollar without clear direction before the Fed.
- US data below expectations.
EUR/USD has erased all gains and is testing the 1.0400 zone, after the emergency meeting of the European Central Bank and before knowing the decision of the Federal Reserve.
ECB, data and then the Fed
Following the emergency meeting, the ECB made no major announcements, saying flexibility will be allowed with the reinvestment of what it receives for bonds purchased under the pandemic emergency program. They also accelerated the plan to create an instrument to avoid the “fragmentation” in the European bond market.
Stocks rose in Europe and the region’s bonds rose. Italy’s 10-year bond yields 3.87% (a 10% drop). The euro initially reacted higher but then weakened on all fronts.
EUR/USD had climbed hours ago to 1,0507, the highest in two days, driven by dollar weakness. Now the pair is looking closely at the weekly bottom at the 1.0400 area. Volatility is expected to persist ahead of the Fed meeting.
In the American afternoon, it is expected that the fed announce an interest rate hike of 50 or 75 basis points. In addition, new projections of macroeconomic variables from the FOMC will be published and Jerome Powell will give a press conference.
Retail sales data for May was released in the US, showing an unexpected decline. The June Manufacturing Empire report also had numbers below consensus.
Technical levels
Source: Fx Street
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