Morning Brief – An interesting day for EURUSD

Charles Porter
Tue 21 Nov 2023

An interesting day for EURUSD

Taken in isolation, many of the events scheduled for today might be thought insufficient to threaten EURUSD. However, together, the concoction of releases concerning the currencies on either side of this pair could make for interesting trading during today’s session. Foremost on the list will be the Fed minutes. As always, this item is not due for release until after the European trading session has concluded. However, with so much focus upon the bond market at present, particularly within the US, anticipation of the release will still likely dominate trading patterns today. Given the volatility the bond market has seen the minutes could have one of two possible impacts. Either they could seem outdated and therefore the market may write down their usefulness speculating that those same policy makers who contributed to the minutes would hold different thoughts today. Or, with such uncertainty still within the fixed income market, they could be held in exceptional high regard.

The minutes to be released cover the decision published on November 1st. This decision showed the Reserve opting to keep rates unchanged and observe the effect of their policy changes so far upon inflation. However, between this decision and the release of minutes due this evening, comments made by Fed Chairman Jay Powell have brought that decision into question. Suggestions the Fed may hike further spurred a bond market sell off only last week. Characteristic of the US Treasury market of late, opposing forces are afoot this week. The minutes will therefore be scrutinised to see balance and conviction of those members seeking a pause within the FOMC.

This is the main event on the USD side today. However, the Euro also sees a host of market moving events taking place. The ECB President Christine Lagarde speaks today as well as other influential European officials. Perhaps most interestingly, the European Commission publishes its analysis (aka watch list) of European Union draft budgets. The expectation is that several member states including France may be in breach of fiscal commitments. How the commission deals with this in its report could have significant impact for Eurozone bond pricing and therefore the Euro. 

Discussion and Analysis by Charles Porter

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