The Euro has pulled back as we enter today’s European trading session after the release of disappointing data once again raises fears on the sustainability of the economic recovery in the Eurozone on the back of the coronavirus.
The GfK Consumer Confidence index from Germany, which is a leading index that measures the level of consumer confidence in economic activity fell by -1.2 for the month of August against analysts’ expectations for a figure of - 0.7 and shows that the German population are still somewhat skeptical that the coronavirus may have run its course and there may be more pain to come.
The main focus for traders today regarding the Euro will be the release of GDP figures from the US as well as the world renowned Jackson Hole meeting, which starts on today, and ends on Friday.
The main event of this 2-day meeting will come to a head tomorrow when US Federal Reserve President Jerome Powell delivers a highly anticipated speech on the central bank’s views about the current state of the US economy.
The question on the minds of investors is whether Powell will provide any information of details as to when the Fed plans to begin reducing their stimulus plan that was introduced to boost the economy which has been decimated due to the effects of the covid pandemic.
Over the last week, risk sentiment has improved but that could all quickly change depending on the words that come out of Powell’s mouth. If he hints that the central bank will begin tapering sooner rather than later, it is likely to give the dollar a boost and send the Euro back below the $1.1700 handle
If Powell chooses to keep the timing of the tapering program under wraps and mentions the US economy will need further improvement before any such moves are made, we may see the Euro continue its recent uptrend which began last Friday
The Euro has managed to break out of the trading channel between $1.1675 and $1.1762 where it has been sitting for the best part of 2 weeks with the occasional move to the upside.
Those occasional moves to the upside faced stiff resistance at the $1.1797 mark and its hard to see this level being broken and may only occur if Fed president Powell takes a cautious approach with his speech on Friday.
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