The Euro was sent spiraling downwards towards the end of yesterday’s US trading session after a surprisingly upbeat assessment of the US economy by the US Federal Reserve sent the greenback soaring against all of the major currencies.
The latest economic forecasts from the US Central Bank included an expected rise in inflation and overall growth this year, while a possible rate hike has been penciled in for next year.
The markets reacted wildly, and US Treasury rates jumped sharply higher as nearly all analysts had expected the Fed to leave rates on hold until at least 2023. If the interest rate forecast turns out to be true, the US will be one of the first developed economies to raise rates after the devastating effects of the coronavirus which is a sign of approval for the US economy.
Eurozone CPI figures are due out late today and the figure is expected to come it at 0.3% which is much lower than the previous month at 0.6%. Anything less may see another round of selloffs for the European currency.
The Euro broke down through a key support level of $1.2000 in yesterday’s session and continues to remain there today with the former support level now acting as resistance.
Although the sharp overnight decline in the currency was sharp and swift, it seems to be under further pressure today and could be headed towards the next support level of $1.1950 which was established in the beginning of May.
This should be enough of a decline related to the news from the Fed yesterday, and after this, the market will once again focus on other economic news to drive the direction of the EURO/USD currency pair.