High uncertainty about the Fed and EUR/USD

Market Leader informed

Since the beginning of the week the direction of EUR/USD was changing: firstly the greenback strengthened and the pair lowered from Monday’s maximum at 1.4080 to Wednesday’s minimum at 1.3733. On Thursday US currency slumped and the pair rebounded to 1.3950, while today EUR/USD turned downwards again.

Elizabeth Belugina an analyst of FBS brokerage company notes that such dynamics may be explained by the high uncertainty ahead of the Fed’s meeting as investors seem very unsure about what exactly will be decided about US monetary policy and how the market will react to it. At first the confidence in the US dollar increased due to the speculation that the amount of quantitative easing would be less than expected. On Thursday, however, the market players felt worried about the negative pressure that the decision to expand monetary stimulus will make on dollar’s rate inciting new wave of USD selling.

It’s quite clear that the entire market is focused on the Fed’s decision coming next week.

Strategists at Rabobank note that despite its Thursday’s decline US dollar remained within its recent ranges versus its counterparts and may stay so even after the FOMC meets in early November. The specialists underline that even if another round of easing is announced, it isn't likely to come all at once. As a result, investors will be still unsure of future Fed asset purchases. Euro-zone sovereign-debt issues may come in sight again raising concerns, so dollar may trade in narrow range versus euro during the rest of 2010.

 

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