EURO/USD Bulls Take Over On The Heels Of A US Federal Reserve Statement And Market Data
The EURO/USD has been on a bull run this week that has been fueled by recent positive market data releases and notably the recent statement by the US Federal Reserve.
Federal Reserve chairman Jerome Hayden Powell confirmed analysts expectations by announcing that there would be no changes made to interest rates. He also backed the Central Bank’s claims of lower global risks. These factors plus the release of US data that was softer than expected provided more momentum for the EURO/USD currency pair.
Some of the positive market data that was released recently include an ADP survey which revealed that 275,000 new jobs were created in the US market in April 2019. This was higher than the estimated figure of 180,000 jobs. However, not all areas managed to reach their projections. For example, April’s ISM Manufacturing PMI was reported at 52.8 which was lower than the 55.0 target.
Although Powell announced that no changes will be made to interest rates, he did note that the Federal Reserve slashed the excess reserve interest rate to 2.35% from the previous 2.40%. This was a technical strategy aimed at maintaining the Federal Reserve funds at a specific range. However, investors were not pleased with the decision.
The EURO/USD is not yet in the clear
Powell noted that the U.S. was still holding negotiations with China in an effort to end their trade wars as he noted that there was a decline in global risks. However, that does not mean that the markets are out of the woods yet. There is still a lot of uncertainties in the market especially with regards to the negotiations which might not yield the expected results if the officials of the two economies fail to find a middle ground.
Meanwhile, on the European side, Britain lawmakers failed to achieve consensus over their exit from the European Union. This resulted in more concerns over a no-deal Brexit which is a possibility but Britain Prime Minister has been pushing for a soft exit. The issue has been pushed back and this means it will take longer for Brexit to actually happen if they go through with it. The delay paves the way for more economic uncertainties which might negatively affect the EURO/USD currency pair like it did in 2018 and early this year.
Meanwhile, analysts believe that the road ahead will be tough for Powell because he has to maintain a balance in the market and also manage the increasing pressure from the White House. This is especially considering the US President Donald Trump’s heavy criticism of the Federal Reserve’s interest rate tactics.
Trump’s latest attack on the Federal Reserve was criticism aired through a tweet, through which he called out the Fed for plans to go back to quantitative easing and plans for a 1 percentage point rate increment. Meanwhile, Powell is avoiding a dovish outlook on account of the strong position that the US economy is currently enjoying, as well as improved financial conditions.