The EURUSD pair euro traded to the downside on Wednesday, September 16, slipping 0.26% to 1.1815. Shortly after the opening of the European session, the price rallied to 1.1883. But then the euro came under pressure from a decline in the EURGBP cross pair.
GBPUSD rose 130 points to 1.3007. EURGBP fell more than 100 points to 0.9095. Cable drew support from media reports that British lawmakers might have found some room for compromise on the Internal Market Law so that it does not breach the previously approved EU Withdrawal Agreement.
The greenback’s descent was halted by yesterday’s FOMC meeting. The US regulator decided to leave the federal funds rate anchored in the range of 0.00-0.25% and pledged that rates would be kept low for a long time.
Not all FOMC members are confident that the Fed’s ultra-easy policy stance will last long. Robert S. Kaplan and Neil Kashkari cast dissenting votes, which came as a surprise to many. Kaplan favors retaining greater flexibility about future rate setting, while Kashkari suggests that rates should stay where are until core inflation has reached 2% on a sustained basis. Their dissenting opinions caught the market off guard.
The Fed predicts that the target range for the key rate will remain at 0-0.25% in 2020-2023. Furthermore, the forecast for US inflation was raised from 0.8% to 1.2% in 2020, and from 1.6% to 1.7% in 2021.
Today’s macro agenda (GMT+3)
12:00 Eurozone: CPI (August)
14:00 UK: BoE interest rate decision and quantitative easing
15:30 US: Philadelphia Fed manufacturing index, building permits and housing starts (August), and weekly jobless claims
The euro slipped due to an increase in the dollar index and a decrease in the EURGBP pair. In Asian trading this morning, speculators pushed the price down to 1.1738. At the time of writing, the euro was trading at 1.1780. The decline halted at the 112th degree of the Gann angle. The price has rebounded, but given that the pound sterling is being bought for euros, buyers are finding it difficult to turn the situation around.
In line with our forecast for today, we see the euro recovering to 1.1795. If buying picks up momentum after the BoE meeting, there may be enough time left for 1.1815 to be reached. The macro agenda is empty this evening, so after a two-day decline, nothing should stand in the way of a correction.
That said, a formidable obstacle facing buyers comes from the exchange rate of the EURGBP cross pair. The euro will draw support from it if the price rises to 0.9123.