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EUR/USD edges higher ahead of Q1 US GDP, Fed meeting in focus

EUR/USD edged higher in Asian trade on Wednesday, after falling back following a surge towards $1.09. Looking ahead, focus will be on the Fed and chair Jerome Powell when the bank makes its policy announcement.

EUR/USD holds gains following a brief risk rally

After consolidating above $1.08, EUR/USD bounced higher across global markets on Tuesday after a brief surge in risk appetite.

The buoyant mood provided strong initial support for stocks as well, while the EUR/USD pair surged towards $1.09 before meeting resistance at $1.0888.

But sentiment dimmed in the US session following a raft of poor economic data releases which served as a stark reminder of the ongoing impact on the real economy from the Covid-19 pandemic.

March trade data missed expectations, while the Richmond Fed Manufacturing Index slumped to a reading of -53 in April. The US Conference Board’s Consumer Confidence Index also slumped to 86 in April, down from 118 the previous month.

The negative data flow helped drive another round of support for the US dollar. But ahead of more key data and events in the US on Wednesday, EUR/USD crept higher in Asian trade to reach $1.085 ahead of the UK market open.

That was accompanied by more stock market gains across the major Asia-Pacific indices, while the AUD – often considered a barometer of global risk appetite – continued its recent push above $0.65.

Fed in focus as US economic strain begins to show

With the EUR consolidating above last week’s one-month low, EUR/USD traders will be watching closely more key data out of the US today.

Key data will be led by the first reading of US first-quarter (Q1) gross domestic product (GDP) figures, which are expected to show the world’s largest economy contracted by 3.7% in Q1.

Then all eyes will be on the US Federal Reserve’s (Fed's) monetary policy announcement. With rates now set at emergency support levels, the Fed is expected to hold fire on any further easing measures.

Instead, commentary from Fed chair Jerome Powell will come under close scrutiny, as markets hunt for clues as to any changes in the Fed’s current outlook, or indications of further support measures should the health crisis continue.

Key data out of Europe on Wednesday will include annual growth in the M3 Money Supply for March as well as April Economic Confidence gauge, ahead of the all-important European Central Bank (ECB) policy meeting on Thursday.

In a sign that risk appetite is still prevalent heading into Wednesday trade, US stock futures are still pointing higher after the S&P 500 dipped into the close on Tuesday.

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