Euro Talking Points
EUR/USD[1] appears to be on track to test the August-high (1.1700) following the Fed Economic Symposium, and recent price action raises the risk for a more meaningful recovery in the exchange rate as bothprice and Relative Strength Index (RSI) threaten the bearish trends from earlier this year.
EUR/USD Rate Eyes August-High as Bearish Trends Start to Unravel
Despite the limited reaction to Germany’s IFO Business Climate survey, EUR/USD extends the advance from the 2018-low (1.1301) amid the less-hawkish tone from Chairman Jerome Powell[2], and the exchange rate may continue to appreciate over the near-term as the recent rhetoric casts doubts for four Fed rate-hikes in 2018.
The Federal Open Market Committee[3] (FOMC) may opt for a dovish rate-hike in September despite the risk for above-target inflation as ‘there does not seem to be an elevated risk of overheating,’ and a growing number of central bank officials may adopt a less-hawkish tone amid the ongoing shift in U.S. trade policy.
Keep in mind, Fed Fund Futures still show bets for four rate-hikes this year, with market participants gearing up for a move in September and December, but it seems as though the central bank is in no rush to extend the hiking-cycle as ‘members agreed that the timing and size of future adjustments to the target range for the federal funds rate would depend on their assessments of realized and expected economic conditions relative to the Committee's objectives of maximum employment and 2 percent inflation.’
With that said, Chairman Powell & Co. may continue to project a neutral Fed Funds rate of 2.75% to 3.00%, and the central bank may
