EUR/USD Daily Fundamental Forecast – November 3, 2017
On the day when Powell was confirmed as the next Fed Chair to succeed Yellen in February 2018, the euro did not show much of a reaction to this news or any of the news so far this week. It continues to consolidate and range within a tight band and this increases the possibility that it could turn pretty volatile if and when there is a breakout.
EURUSD Shows Little Action
The euro had been battered and dropped by about a cent last week on the back of the extension of tapering that was announced by the ECB. The market was expecting the ECB to propose the tapering of the QE and also bring the QE to an end gradually but it did not expect the ECB to propose the extention of the QE and this weakened the euro and led to a sell off during the last week. The euro seems yet to recover from that shock and continues to trade in a weak manner We had been mentioning in our forecasts that there was likely to be a weak bounce in the euro as a corrective relief measure and that it is likely to last only for the short term.
Yesterday, the focus was on the pound and the dollar due to the rate hike announcement from the BOE and the announcement of the next Fed Chair. Though the dollar bulls had hoped to see the hawkish Taylor being announced as the next Fed Chair, Trump chose Powell to succeed Yellen but the euro seemed to have had little impact due to this announcement, partly due to the fact that it was already priced in and also due to the fact that it is clear that irrespective of who the Chair is, the rate hikes would be driven by the incoming data.
Looking ahead to the rest of the day, we have the NFP employment report later in the day which should more or less determine whether there would be a rate hike in the US in December. If it comes out strongly, then we could see the dollar begin to strengthen as the market begins to fully price in the rate hike.
This article was originally posted on FX Empire