- Fed predicts -6.5% GDP contraction & unemployment at 9.5%
- Safe haven US Dollar rising as investors focus on dire outlook rather than Fed support
- Euro investors look to Euro group finance ministers meeting
- At 07:15 UTC, Euro to US dollar (EUR/USD) is trading -0.1% at US$1.1350
The Euro is slipping lower versus the US Dollar on Thursday, ending a three-day winning streak. The Euro settled on Wednesday +0.2% at US$1.1371, falling back from a fresh 3 month high of US$1.1422 reached earlier in the session.
At 07:15 UTC, EUR/USD is trading -0.1% at US$1.1350 as investors continue digesting the Fed’s gloomy outlook.
As expected, the Federal Reserve kept interest rates and monetary policy unchanged. The Fed also said that it will keep interest rates at 0 until 2022 as it remains committed to supporting the US economy through the coronavirus pandemic.
The Fed predicted that the US economy would contract -6.5% in 2020 and unemployment will be 9.5% in the first economic projections from the central bank since the start of the coronavirus crisis. The Fed was clear that this will be a long rocky road to recovery, dashing any remaining hopes of a quick economic recovery from the pandemic.
Whilst the US Dollar dropped lower initially following the Fed’s statement, safe haven flows have increased today as investors focus more on the dismal outlook rather than the support that the Fed is offering.
Looking ahead US jobless claims will be in focus. Initial jobless claims are expected to fall to 1.55 million from 1.87 million as they are expected to continue to retreat from March as April’s peak. However, attention will be shifting more towards continuing claims for clues as how quickly people are being hired. This will provide some clues as to how quickly the labour market will recover. Continuing claims are expected to drop to 20 million from 21.48 million.
The Eurozone economic calendar was sparse yesterday and is quiet again today, leaving the euro to trade at the will of the US Dollar. Today the Euro area Finance ministers will meet to discuss the EU recovery package. Reports suggest the frugal four countries which had been against the EU rescue package could move on board.
