EUR/USD slid to 1.1250 in the European session and has now extended its gains below 1.12. The pair is over 250 pips below the post-Fed peak.
And the reason for the fall come from the latest talk from the Fed and also from the ECB.
The markets could ignore known hawks like James Bullard (a non voter) and Jeffrey Lacker, who dissented in favor of a rate hike. However, when a centrist like Denis Lockhart seems confident about a move until year end, the dollar gets confident as well.
He still expects the Fed to raise rates this year, and doesn’t see a delay of a meeting or two as a big deal. He also seems unexcited by the Chinese crisis. They also justify a delay but not a change of course. And speaking of dismissal, he also dismissed the dollar strength, labeling it as “secondary†for the Fed.
On the other side of the Atlantic, we heard ECB officials continue holding the door open for extending QE. This talk came from Peter Praet, who said that the old continent is still not out of the woods and that the ECB has tools to anchor inflation expectations.
It also came from Ewald Nowotny, who see great uncertainty over the situation in emerging markets. “Great uncertainty†means worries.
As we already mentioned, a dovish Fed means even more dovish central banks elsewhere, and the ECB has already sent a signal it is ready to act.
