Euro edges lower ahead of FOMC

It’s been a quiet day on the currency markets, ahead of the key event of the week, the FOMC policy meeting (18:00 GMT). Investors are displaying caution in the hours ahead of the meeting, and the currency markets are in a wait-and-see mode.

Will the Fed discuss a taper?

Today’s FOMC meeting, the last meeting before the Jackson Hole symposium next month and the September policy meeting. The Fed is unlikely to announce a taper, but analysts will be combing through the rate statement, looking for any subtle changes in language as well as any hints of the ‘T’ word. Any changes in the rate statement’s language could shake up the US dollar.

There are some important factors that would lend support to the view that the Fed will balk and not provide any hints about plans to taper asset purchases. The resurgence of the delta variant, particularly in the Asian Pacific region, continues to raise worries about the impact on the global economy. Closer to home, the Biden administration’s infrastructure proposal has hit a dead-end in Congress, at least for the time being.  If the Fed decides to kick the taper ball down the road, the US dollar, which has retreated this week, could lose more ground.

Over in Europe, consumers remain sour in Germany, the largest economy in the eurozone and a bellwether of economic conditions for the rest of the bloc. The GfK Consumer Climate hasn’t managed to post a gain since March 2020, just before Covid caused an economic meltdown. The reading of -0.3 indicated stagnation, and was a bit below the consensus of +0.9 points. Consumer spending is a key driver of the economy, but consumers are unlikely to feel much confidence until health restrictions are eased and Covid is firmly under control.

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EUR/USD Technical

• On the downside, there is support at 1.1737. Close by, there is support at 1.1706
• EUR/USD is testing resistance at 1.1815. Above, there is resistance at 1.1862

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-

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