Home Forex News EUR/USD Rallies As FED Announces Purchase of Corporate Debt Plans

EUR/USD Rallies As FED Announces Purchase of Corporate Debt Plans

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  • FED Liquidity Stimulation Plans
  • Dollar Weakness
  • Economic data Watch

EUR/USD pair was upbeat in the Tuesday trading session, keeping up with the bullish momentum registered at the start of the week. A bounce back from one-week lows has continued to gather steam with the pair showings sign of bouncing back to three-month highs at the back of EUR strength.

EUR Strength

The EUR has remained resilient against the Dollar registering one of the longest rallies against the Dollar. However, the pair has struggled to penetrate the resistance level of $1.13 highly needed to send the pair to previous highs of $1.14.

The EUR/USD pair appears to have regained its bullish momentum on the Federal Reserve, moving to avert another market crash and support the struggling economy with a new bond-buying program. The Fed has confirmed it will start buying corporate bonds as it looks to ensure companies have access to a sufficient amount of money to continue operating.

The FED is to buy corporate debt with maturities of five years or less. The Issuers must be rated at BBB-or Bas3, depending on the agency. The buyback builds on the ongoing ETFs purchasing spree. Likewise, the FED has confirmed it will expand the scope of its Main Street Lending Program to allow small and medium businesses to receive much-needed financial support.

EUR/USD Outlook

The corporate bond-buying program helped boost sentiments in the equity market that had come under pressure in the wake of a new wave of coronavirus infections. Similarly, the U.S dollar weakened across the board as risk sentiments in the market eased.

The U.S dollar index, which measures the strength of the Greenback against the G10 currencies, has dropped to lows of $96.34. The biggest beneficiary of the greenback weakness is the EUR/USD pair that has continued to edge higher.

Looking ahead, traders await FED Chair, Jerome Powell’s testimony in Capitol Hill later on Tuesday. The release of U.S core retail sales data should also influence the EUR/USD direction of trade late in the day.

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