Weakness in the US dollar has continued this morning, following the release of the minutes from the US Federal Reserve’s most recent meeting.
The minutes revealed that many on the board would like to see further action from the central bank to help support economic recovery, with markets reaching the obvious conclusion that more quantitative easing could well be on the way.
The resulting speculation on QE has extended the recent rallies in both EUR/USD and GBP/USD. The last month has seen a 500-point recovery by EUR/USD , and at 1.2550 this morning the currency pair is back to levels last seen in early July. The euro has enjoyed a good few days of strength this week, however as usual this needs to be tempered with a note of caution surrounding the eurozone debt crisis. Meetings have started between Europe’s finance ministers and leaders – today French President Hollande is in Germany visiting Chancellor Merkel – and there is always the potential for these events to catch everyone off guard, injecting volatility (in either direction) into the forex markets. For now though, markets seem to be taking a relaxed view of this, with some suggesting that the next technical hurdle for EUR/USD could be the June highs around 1.2750.