The Euro was thrown a lifeline in yesterday’s trading session by US Federal Reserve President Jerome Powell who surprised the market with a downbeat assessment of the US economy which sent the greenback tumbling against the major currencies.
In a speech to the US congress, most in the market expected Mr Powell to lay the groundwork for a reduction in the current stimulus plan and give some sort of time frame for a rate hike which given the latest data out of the US, such as yesterday’s inflation figures that rose by the most in 13 years, would have been more than justified.
Instead, the Fed chairman told US lawmakers that the US economy still had a long way to go to reach the level of substantial progress, and the jobs market in particular, was still well below pre-Covid levels. He also retreated his position that the current inflation figures were temporarily high and would subside over the coming months and the central bank had no plan to reduce and would actually continue to pump money into the economy by way of asset purchases.
The 2nd part of Powell’s speech to congress is due out later today and will be the major fucus for the Euro/USD currency pair before the release of retail sales figures from the US on Friday.
The Euro was in danger of breaking the critical support level of $1.1775 formed on Tuesday but as earlier mentioned, Fed president Powell saved the day.
With US monetary policy more or less clear for the nearest future, the market will now once again focus on economic data and the European currency will need to break through the $1.1863 resistance level to continue any sort of substantial recovery.
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