Published on 19.08.2021 09:18

The Euro felt the force of the US Federal reserve yesterday and has hit a fresh 9 month low against its US counterpart after the US central bank yesterday conveyed to the market that a reduction in stimulus was in the way this year

Federal Reserve board members at their July meeting have made plans to reduce the pace of their monthly bond purchases, presumably before the end of the year, the meeting minutes released yesterday indicated.

“Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes stated.

The news has revealed a big unknown on the timing of the Fed’s plans to reduce their economy saving bond buying program and now the big question is, will this be accompanied by interest rate hikes which is surely bound to put further pressure on the Euro.

It seems members of the Federal Open Market Committee wanted to be clear by releasing the minutes that any reduction, or tapering, of assets was not laying the groundwork for an imminent rate hike this year and any move in rates will not occur until late 2022 at the earliest.

The main thing concerning the Fed over any future rate hikes is the state of the jobs market so all eyes will be on today’s release of US Jobless Claims which are expected to hit the market at 363K versus last month’s figure of 375K.

It’s also worth keeping an eye on the Philadelphia Fed Manufacturing Survey for August which is also expected to improve from last month at 23, up from 21.9 in the previous month. Above all, risk catalysts will keep the driver’s seat and favor EUR/USD bears unless any positive surprises trigger USD pullback.

The focus now shifts to the Fed’s annual conference in Jackson Hole, Wyoming, next week for further signs about the central bank’s next steps.

Technically, the EUR/USD is looking bleak and has broken down through the critical support level at  $1.1713 and is now pressuring the next resistance level at  $1.1675 and a break of this mark will see $1.1640 come into play.

With no economic news due for release from the Eurozone today the jobless figures from the US and the latest coronavirus news are going to be the key drivers for the European currency.


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