EUR/USD: Fed statement’s a double-edged sword for the euro

Expectations for the Federal Reserve to cut interest rates have pushed US yields lower and the greenback dropped sharply. EUR-USD is benefiting from this USD weakness. However, this may come back to hit the pair, in the opinion of Yohay Elam from FXStreet.

Key quotes

“Christine Lagarde, president of the ECB, has been reluctant to act as she has limited space. Moreover, she wants governments to step up their game and open their purse strings – especially Germany. Nevertheless, the Frankfurt-based institution will want to be seen as doing its part.”

“If Lagarde or her colleagues make a similar commitment, the euro may react. It may be in the form of more QE rather than cutting rates. In any case, that would weigh on the common currency.”

“The respiratory disease has already taken the lives of over 3,000 people worldwide and the number of infections is nearing 100,000. Italy, the epicenter of the outbreak in Europe, has reported over 4,000 infections and more than 20 deaths. The disease has spread to Berlin and Brussels.”

“With fears still running high – including in Europe – it is hard to see how the euro extends its gains.”