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The US currency continued to strengthen against its main competitors amid relatively neutral comments from Fed's Chairman Jerome Powell. The USD index also rose above 94.2 points for the first time in two months.
J. Powell said that the prospects for the national economy seems to be quite uncertain and its further course will depend on containing the COVID-19 pandemic successfully and political decisions taken at all government levels. However, this did not surprise the investors. Instead, the statements of other Fed members have a more significant effect on the markets.
In connection to this, Chicago's Fed President Charles Evans, believes that the US economy could show a longer and slower recovery and even recessionary dynamics if Congress does not pass an additional financial stimulus package. He also said the Fed could raise interest rates before inflation hit an average 2% target.
These optimistic remarks and "hawkish" comments by Charles Evans contributed to the increase in demand for the US currency.
In turn, Thomas Barkin, head of the Federal Reserve Bank of Richmond, said that the US economy directly depends on the epidemiological situation in the country. However, he noted that spending is recovering faster than employment.
Positive statistics from the United States also supported the USD. In view of this, manufacturing activity in the Richmond region exceeded forecasts, while US existing home sales hit their highest level in nearly 14 years.
Against the backdrop of a stronger dollar and investors fleeing from risk, the EUR/USD pair plummeted to its lowest values since the end of July.
On another note, market participants are worried about growing tensions between Washington and Beijing. Yesterday, US President Donald Trump called out China to be held accountable for the spread of the coronavirus, as part of his speech at the 75th session of the UN General Assembly.
The euro suffered losses against the US dollar for the third trading session in a row. Therefore, the gloomy mood around the single European currency comes amid rising COVID-19 cases in Europe and worsened by the re-introduction of new quarantine measures which may lead to an economic slowdown in the recovery of the region. Another reason for its decline is the ECB's recent announcement to track the euro rate.
In the wake of the sell-off of risky assets, the dollar managed to exit the range in which it had consolidated since the end of July. The USD index rose above the 50-day moving average, while the main currency pair moved below this line.
Today, the euro slipped to $ 1.1675 against the US dollar, hitting its lowest level in eight weeks and threatening to break the upward trend that formed in May.
Now, if the EUR/USD bears will be able to develop an offensive from the current levels, this can quickly lead the pair to 1.1640. If sellers do not leave here, then the classic pair can test the 1.1500 level (a psychologically important round level and a 61.8% correction area from the March–September rally) by the end of October. However, it is still unlikely to decline to this level, since a sharp decline in macroeconomic forecasts for the Euro area or a more "dovish" rhetoric from the ECB will be necessary.
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