Yesterday, the EUR / USD rebound after three consecutive slump. The pair fluctuated within a range of $ 1.08038 and $ 1.08866 before closing at $ 1.08757, exceeded the opening price of $ 1.08565.
Euro gains versus the greenback is due to the following reasons:
First, the Beige Book report from Fed showed uneven US economy growth .
Beige Book survey is based on reports from late 11/2015 to early 1/2016 from Fed 12 branches. According to it, two branches reported growth with moderate speed and 7 branches reported slower growth. Apart from Boston showing gains, other the branches in New York and Kansas City both reported disheartening economic activities. In particular are the manufacturers in energy industries that suffer the worst when no signs of support for oil price from both supply and demand side is emerging.
The report emphasized challenges that Fed are facing in the meeting later this month: The growth in labor market can not push wages and inflation upwards. Only a few economists expect an outcome of interest rates hike from the meeting on 26-27 / 01. Possiblity of a rising dollar due to tightening might take place in March when signals are clearer. Hence, for now dollar is bearing downward pressures, pushing the pair up.
Secondary, US stocks slump while global stock stabilized.
The Asia and Europe stock markets are making recovery as balance of trade of China exceeded expectations and Chinese government has also taken measures to prevent the selling-off as well as removed the fears about further devaluation of the Yuan. Meanwhile, the US stock market is affected negatively by companies such as manufacturers, retailer and energy producer. The Dow Jones index fell more than 360 points and the S & P 500 slipped 2.5%, closing at 1,890.28, the lowest since late 9/2015.
When the global markets are in chaos, the dollar acts as a haven-asset, but when only the US is, the dollar suffers. EUR / USD therefore is supported to go up yesterday.
The US dollar index, a measure of the greenback’s strength against a basket of six other major currencies was increased by 0.15% reached the highest level of 99.40 before falling to 98.98 at the end of the session.
Analyses of Group If24h