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EUR/USD Mildly Higher on Risk Appetite, Capped by ECB Monetary Stimulus Outlook

October 6, 2020 by

EUR/USD traded mildly higher today following yesterday’s big rally. Market analysts explained the rise by risk appetite caused by various reasons, such as hopes for a stimulus package from the US government and the news that US President Donald Trump left the hospital, where he was staying after testing positive for COVID-19. Today’s gains were very small, though, as the currency pair were under pressure from comments made by European Central Bank President Christine Lagarde. She voiced concerns about economic recovery in the eurozone and signaled that the ECB is ready to provide additional monetary stimulus. As for today’s macroeconomic releases in the United States, trade balance data was the only notable report. Yesterday’s reports sent confusing signals about the US services sector, as the indicator from Markit fell a bit, while the indicator from the Institute for Supply Management showed surprise growth. Ultimately, though, both remained firmly above the neutral 50.0 level, meaning that the sector was experiencing a robust growth.

Trade balance deficit was at $67.1 billion in August, up from $63.4 billion in July, whereas economists had predicted a decrease to $66.2 billion. (Event A on the chart.)

Yesterday, a couple of reports were released (not shown on the chart):

Markit services PMI fell from 55.0 in August to 54.6 in September according to the final estimate, matching the preliminary estimate and market expectations exactly.

ISM services PMI rose to 57.8% in September from 56.9% in August instead of falling to 56.3% as analysts had predicted.

If you have any comments on the recent EUR/USD action, please reply using the form below.

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