Fed Warns of Challenging Months Ahead

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Grim Readings for the Greenback

The US dollar index continued its tragic decline yesterday, closing 0.28% lower.

This comes after the Federal Reserve left rates unchanged and pledged to continue its bond purchases.

Jerome Powell warned that the coming months would be particularly challenging, as the US battles a surge in coronavirus cases, while businesses and the unemployed face deepening hardship.

Retail sales added to growing signs of a slowdown in the economy’s recovery, falling by the most in 7 months.

Euro Jumps on Weak Dollar

The euro edged 0.41% higher on Wednesday as it breached the 1.22 ceiling.

A weakened US dollar added fuel to the rally, whilst eurozone business activity rebounded faster than expected.

The Q4 downturn now looks far less steep than the hit from the pandemic seen earlier in the year.

However, with the harsh lockdowns remaining in place over the festive period, will the next PMI data be more worrying?

Deal Approval Hangs in the Balance

Sterling moved 0.40% higher yesterday as it climbed over the 1.35 handle.

The price action remains on Brexit, with the chances of a deal seemingly feeling a little more upbeat.

Despite comments from the UK PM that a no-deal outcome is likely, investors are likely to have increased the hope that the two sides will reach a deal.

However, the key sticking points of the level playing field remain, as well as negotiations over fisheries.

Wall Street Eyeing Relief Package

Indices closed near record territory on Wednesday, after the Fed vowed to keep interest rates low until the economy makes substantial progress.

Optimism also was running high over prospects for another fiscal relief package from Congress, as the Fed predicted a faster decline in unemployment in 2021.

Risk Appetite Propels Gold

Gold ended yesterday’s session 0.57% higher as it aims for the $1900 handle.

The positivity surrounding US coronavirus stimulus and the upbeat Brexit headlines favored the yellow metal, whilst the US dollar weakness added to the sentiment.

Can the metal rally continue?

Oil Continues the Surge

WTI closed 0.63% higher on Wednesday, touching $48 for the first time since March.

With the EIA beating analysts’ expectations of an inventories draw, the question now remains if oil can keep overcoming Covid-19 fears.

With 2021 looking bleak with further lockdowns in sight, will we see another crash to record lows for the black gold?

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