Forex Today: Euro breaks out of range as dovish Fed talk weighs on Dollar

Market Analysis /
10 Jan 2019

LDN/NY Wrap:

* German Trade Balance (November): 19.0 bln vs 17.9 bln expected

* Euro Zone Unemployment Rate (November): 7.9 % vs 8.1 % expected

* Bank of Canada keeps rates unchanged, as expected; sees pace of further hikes depending on oil and housing outlook

* EIA US weekly oil inventories -1680k vs -2700k expected


The US Dollar came under increased pressure on Wednesday, following another round of dovish comments from FOMC members. While the meeting minutes did not contain any surprises, it was notable that the members consider the timing and extent of future rate hikes as less certain than before.

EUR/USD managed to break out of the 1.12-1.15 range, where it has been stuck for the past two months. The clear breakout and daily close above 1.15 indicate that the currency pair could gain further momentum in the near-term.


Traders should keep an eye on the British Pound as well. Volatility is likely to increase prior to the Brexit vote on January 15th. The currency is currently benefiting from the broad Dollar weakness, but the on-going uncertainty could prevent any significant gains ahead of the vote.

The Session Ahead:

* The focus will be on Chinese inflation data. The market is expecting a 0.3 % print for the month-on-month figure and 2.1 % for the year-on-year number.

* The economic calendar for the upcoming European session is light, but volatility could increase in the NY session, during which US New Home Sales and Initial Jobless Claims data will be released.

* Later in the day, Fed Chair Powell will speak, followed by FOMC members Bullard and Clarida.

* No surprises expected from Powell´s speech, but dovish comments could come from both Bullard and Clarida, increasing the pressure on the US Dollar.

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