- EUR / USD looks set to drop after the rejection to 1.09.
- Powell’s comments on the economy and negative rates continue to augur well for the US dollar.
- US data is expected to show that an additional 2.5 million workers filed for unemployment in the week ended May 8.
The American dollar prolonged its gains overnight, causing the EUR / USD to fall against a backdrop of risk on the Asian stock markets.
At the time of publication, the EUR / USD is trading below 1.0810, which represents a decrease of 0.10% on the day, after going from 1.0896 to 1.0812 on Wednesday. Meanwhile, major Asian stock indices like Kospi in South Korea, Hang Seng in Hong Kong and S & P / ASX 200 in Australia are flashing red.
Investors avoid risk and buy US dollars, perhaps due to new growth problems. The chairman of the Federal Reserve warned on Wednesday that the magnitude and speed of the current economic downturn is unprecedented in modern times, far worse than any recession since World War II. Powell warned that a deeper and longer downturn could occur if Congress does not provide additional budget support.
As a result, US stocks fell and the US dollar resumed an offer. The drop in EUR / USD observed at the time of publication is an extension of the overnight losses triggered by general demand for the greenback.
The strength of the dollar could also be attributed to Powell’s comment that the central bank does not view negative interest rates as an option. Tuesday, fed the fund futures contracted for negative rates in June 2021.
Look at the American data
Initial US jobless claims, expected at 12:30 p.m. GMT, should show that 2.5 million people first filed for unemployment insurance in the week ended May 8.
Risk aversion is likely to worsen, causing the EUR / USD to fall if the data shows a larger than expected increase in unemployment claims. This would validate Goldman Sachs’ decision to raise its projected peak US unemployment rate to 25% from the previous estimate of 15%.
The last German Consumer price index for April, scheduled to exit at 6:00 a.m., could turn out to be a non-event for the markets unless the number is significantly lower than estimated. In this case, the euro may face stronger selling pressure.