Published on 03.11.2021 09:20

The Euro remains stranded around the $1.1580 level heading into the European session today after falling in yesterday’s session on the back of disappointing data from the Europe.

PMI manufacturing figures from both the Eurozone and Germany fell short of expectations which shows business conditions for the Euroblock still have some way to go before reaching their pre Covid 19 pandemic levels.

The German Markit Manufacturing PMI came at 57.8 lower than the 58.2 estimated while the Eurozone Markit Manufacturing PMI hit the market at 58.3 against analysts’ expectations for a figure of 58.5 

All eyes will now be on today’s economic news from the US with the highlight of the day being the latest interest rate decision and monetary statement from the US Federal Reserve.

It’s long been expected that this is the rate decision at which the Fed will announce their intentions to begin tapering asset purchases. Many market participants were looking for that announcement at the September rate decision. 

At that time, US Federal Reserve President Jerome Powell said that “significant further progress” that the bank had hoped to see had not been met, especially with regards to the jobs market even though inflation was sticking above 5%.

Mr Powell also noted the central bank was ready to make that taper announcement soon provided that employment data didn’t massively disappoint, and global markets largely inferred that to mean the move would come this month. 

The tapering announcement is more or less priced into the EUR/USD currency pair as well as one rate hike for next year so the focus for market participants will be any signs from the Fed of a potential 2nd rate hike and the exact timing of when it will be delivered.

If the Fed surprises the market by announcing a further delay of their tapering program of if there are no mention of rate hikes the Euro looks set to benefit and a sharp bounce higher is expected.

A bullish tone by Fed President Powell will likely see the EUR/USD currency pair break down through the critical support level of $1.1530 and make its way past the $1.1523 mark on its way to a new yearly low.


FAQ