The EURUSD has been gaining over the last 24 hours, something in line with what we have been saying in our forecasts over the past few days. The weak NFP data from last week continues to haunt the dollar and it appears to be clearly on the backfoot as the market now has second thoughts on what the Fed would do for the rest of the year. The euro has also been getting some relief as the effect of the Catalonia referendum seems to be fizzling out.
EURUSD Earns Respite from Weak Dollar
The markets had been quite sure of the Fed hiking rates in December and the last minutes from the FOMC had indicated as such. But the incoming data since then has been choppy at best with the NFP this month failing on all counts. This has pushed the dollar on the backfoot all across the board and the EURUSD pair has been making full use of it as it has risen from the low 1.17s to the low 1.18s as of this writing and it looks good for more.
The euro had also been under pressure over the last few days ever since the Catalonia referendum led to fears that they would declare independence. This has put the euro also on the backfoot but yesterday, it got some relief as the President of Catalonia declared that they would be delaying their call for independence. This led to a relief rally in the pair which pushed it above 1.18. As of this morning, there have also been reports of increasing tension in the Korean region with the US discussing “options” to deal with North Korea and with this escalation, the dollar has again been on the backfoot.
Looking ahead to the rest of the day, the focus would obviously be on the FOMC minutes that will be released later in the US session today. The market would want to know what the Fed members think about the next rate hike, especially considering the fact that the incoming data over the last month or so has not been as good as they would have wished. A hawkish Fed could lead to a bout of dollar buying which would lead to a correction in the EURUSD pair.