This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The euro plummeted versus the US dollar on Wednesday following the Federal Reserve’s statement; the possibility of the Fed tapering their stimulus package in the next few months drove dealers to dump the euro and buy the US dollar. The euro continued to drift lower versus the US dollar yesterday, as stronger-than-expected homes sales and manufacturing figures from the US pushed the euro further into the red.
The Federal Reserve’s monetary policy has been extremely loose over the past few years. Interest rates have been ultra-low and $85 billion a month is being pumped into the financial system. This has kept the US dollar relatively weak in recent years. Traders will be keeping an eye on US economic announcements, and if the US continues to report positive economic indicators we could see the euro slide versus the US dollar as it may encourage the Fed to taper its policy.
We are not expecting any economic announcements from the US today, so it is possible we could see the euro climb higher versus the US dollar as traders close out their short positions.