Daily Market Recap - EURUSD Dollar Stable against the Euro after US GDP

The EURUSD hit a two-month high overnight on Wednesday, with the dollar falling slightly following the Fed's rather dovish statement and speech by Jerome Powell regarding the inflation outlook.

Indeed, although the FOMC released its statement on Thursday that “indicators of economic activity and employment have strengthened” but that “the synchronized global reopening should lead to upward pressure on prices, but that these price increases will be temporary and one-time and do not constitute an inflationary process”.

In the face of these comments, investors' expectations for monetary policy normalization have diminished. The probability of at least one rate hike by the end of the year fell from 15% to 14%.

The Fed decided to keep monetary policy unchanged until the end of the year as expected and forecasts to reduce asset purchases in 2022. A rate hike should be expected around 2023 at the earliest when the labor market has fully recovered to its pre-crisis level and uncertainties are lower.

Meanwhile, U.S. Gross Domestic Product grew at an annualized rate of 6.4% between January and March, thanks in part to strong consumer spending on goods, according to the U.S. Commerce Department's first estimate released Thursday. This increase, in line with expectations, is higher than the +4.3% of the fourth quarter of 2020.

From a technical perspective, the EURUSD last night broke above its bearish oblique, which passed through the January and February highs. The breakout from this oblique is a signal that theoretically puts an end to the downturn we have been experiencing since the beginning of the year. That said the strong U.S. GDP figures have somewhat muddled the bullish trend late in the session.

(Chart Source: Tradingview 29.04.2021)

Looking ahead, the EURUSD could continue to rise until it reaches its high for the year at $1.2350, and then possibly new highs. However, the bullish outlook would be invalidated if it were to fall below yesterday's low of $1.2050.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.