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EUR/USD Rebounds After FOMC-Inspired Decline Loses Momentum

September 17, 2020 by

EUR/USD was falling at the start of Thursday’s trading session but reversed movement later and has erased almost all of its losses by now. The dollar was surprisingly strong following yesterday’s monetary policy announcement from the FOMC considering how dovish it was. But apparently, markets were expecting even more dovishness, perhaps even hints at additional monetary easing. But the Federal Reserve revealed that it is not planning to change its policy in the foreseeable future, making traders think that perhaps the greenback was oversold. Yet analysts speculated that the gain will likely be short-lived as Fed’s extremely loose monetary policy will be weighing on the US currency in the long term. And it looks like markets have realized that, taking away the dollar’s gains. On top of that, today’s macroeconomic data in the United States was rather disappointing for the most part.

Philadelphia Fed manufacturing index slipped from 17.2 in August to 15.0 in September, matching the median forecast exactly. It was the fourth consecutive positive reading after the index slumped to extremely low negative readings in April and May. (Event A on the chart.)

Initial jobless claims were at 860k last week, seasonally adjusted, down from the previous week’s revised level of 893k (884k before the revision). Analysts had predicted a bigger drop to 825k. (Event A on the chart.)

Both housing starts and building permits fell in August. Housing starts were at a seasonally adjusted annual rate of 1.42 million, down from 1.49 million in July. Building permits were a seasonally adjusted annual rate of 1.47 million, down from 1.48 million in the previous month. That is compared with analysts’ predictions of 1.47 million for housing starts and 1.51 million for building permits. (Event A on the chart.)

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