The Fed considers helping the US economy “fairly soon” while, the ECB warns of weak profitability and the Dow Jones rally pauses for now. What moves EUR/USD, Gold, and Oil markets today?
The Fed’s Minute
FOMC committee signaled in their last meeting that an increase in the current quantitative easing program could be on the way as the central bank thinks of ways to boost the US economy. It is worth noting that the current program has taken the Fed balance sheet to over $7 Trillion.
At present, the Fed buys $120 billion of bonds on monthly basis, and it could increase the amount or extend the duration of those bonds. Nonetheless, the minute did not specify a date to take this step however, members were thinking to act fairly soon.
The committee expressed concerns about the US economic growth for being below the pre-pandemic levels, although the Fed Chair said that their still plenty of ammunition and that the central bank was committed to support the economy. The Fed members considered that winding down the program should be before any rate hike.
The ECB Warns
The ECB warned that the European banking sector would not recover pre-pandemic profit levels before 2022 and therefore, the ECB vice president called to increase banks profitability, through reducing costs and improving the cost to income ratio.
Banks profitability would be affected by the current lockdown in Europe and the uncertainty of the time when the coronavirus vaccine will be distributed on large scale in Europe and when people can get back to normal life.
Paused Rally
The US equity market paused its rally after disappointing US economic data and some taking profit operations before the thanksgiving holiday. Therefore, the Dow Jones returned to sub 30000 levels on Wednesday and closed in the red.
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Change % | |
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-0.2% | |
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-0.6% | |
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+0.4% | |
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+1.0% | |
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-0.3% | |
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-1.0% | |
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-0.1% |
EUR/USD and Main FX Markets
Bad economic data weighed on the greenback and led the US dollar index to open on Thursday with a downward gap, and eye a test of the September 1 low at 91.71. A close below that level changes the technical outlook from neutral to negative.
The EUR/USD edged higher on Wednesday due to a weaker US dollar. Nonetheless, markets will follow the European rescue package updates and await the ECB meeting in December to find out its growth and inflation forecasts with the tool/s the board will use to support the Eurozone’s economy (interest rates cut, increase PEPP quantity and durability, or maybe both).
The GBP/USD held gains on Wednesday thanks to the US dollar weakness and the market’s pricing a possible EU-UK trade deal to be announced soon. The pair’s outlook remains positive and the price could be on the way for a test of 1.3460.
Gold and Oil
The Oil price rallied further on Wednesday and the market focus is on the OPEC+ meeting on Monday and Tuesday to decide about production levels. The price increased significantly in November thanks to the coronavirus vaccines’ updates that fueled optimism of better global demand in 2021, and a possible extension of production cuts to beyond January next year. Nonetheless, a higher oil price could make it more difficult to reach a consensus on further cuts. The Brent Crude eyes a test of $ 50.50 a barrel.
The Gold steadied above $1,800 as the precious metal found some strength from the US Dollar's weakness. That said, the Gold technical outlook remains negative while below $1,861, a close below $1,796 could send the price even lower towards $1,747.
Looking Ahead
Not much today on the economic calendar due to the US Thanksgiving holiday, the Market focus will be on the ECB monetary policy meeting account due at 1:30 (GMT).
