Forex Market Bounces Back as Fed Hints at Tapering

  • Euro and Pound Remain Strong Despite Changing Tone
  • US Jobless Claims Set to Drop Lower 
  • Wall Street Braces for Another Negative Open

The Euro forex market continued to bounce back stronger despite some hinting from the Fed that they are preparing to adjust their policy and adopt a more stringent approach with the tapering of bond purchases if the economy continues to run at strength like we have seen recently. This initially strengthened the USD though positive jobs data and other factors have led the recovery. Markets on Wall Street also look set to open lower for a fourth consecutive day.

Domestic Positives Help Euro and Pound

Considering the feeling that has come from the recent Fed meeting minutes and the news that tapering may be considered following a strong pick up in economic activity, the forex market has responded well. Typically this could be cause for those forex trading to flock to the US Dollar though they have largely remained in place. This is further evidenced by the US Dollar Index closing in on a 2021 low near 89 points.

Key reasons behind this have been positive points at home for both the Euro and Sterling. The former has most definitely benefited from an accelerating vaccination campaign and reopening in the economy. This has also been the case for the UK and Sterling which has led the way for many in regard to reopening and easing of social restrictions.

Unemployment Numbers Set for Further Decline 

Another factor that forex brokers will note as being helpful to keep the Dollar down has been the weekly jobless data. Released later today this is expected to show a further decline in keeping with recent weeks which has seen the number drop consistently, albeit not by a great deal. Analysts expect this week’s release to show 452,000 new claims for unemployment in the week ended May 15th.

A speech later today from ECB President Christine Lagarde is also set to acknowledge the improving COVID situation along with noting the progress of economic reopening while traders in both Europe and the US will listen intently to any plans the EU has on shifting economic policy to adopt a less dovish stance. This comes amid some fears that the Fed may be lagging behind in action to move away from its current stance.

Markets Point to Negative Opening

Meanwhile, on Wall Street, the major indices pointed to another negative opening. Dow Jones futures traded more than 150 points lower than the previous close in what has been a rocky end to the week across the board.

Tech, in particular, has continued to suffer as traders look for direction in economic policy with the continued fear of inflation hanging on and impacting high-flying growth names. The NASDAQ is also set to open in the red after escaping strong selling pressure early in the session yesterday to recover from a session low of being down 1.7% to end the day flat.

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