The US Dollar remains weak this morning following the latest Federal Reserve interest rate meeting overnight.

Jerome Powell, the Fed Chairman, painted a gloomy picture of the US economy and highlighted that data had been a lot weaker since the rise in US coronavirus cases over the past 6-weeks. Although they kept policy on hold, they reiterated their commitment to using all of the monetary policy tools available but hinted that US politician will need to do more to help stimulate the economy. No extension to US Covid-19 unemployment benefits has yet been agreed between the Republicans and Democrats and these are set to expire this week.

The USD had already been on the backfoot over the past couple of weeks amid rising US Covid-19 case numbers, an increase in market risk appetite and the continuing fallout in Washington over the extension of unemployment benefits. The currency markets have become more concerned the US recovery will be a lot slower than expected which has been causing a move away from the Greenback. Things can change quickly and particularly market sentiment which has been a key driver recently.

Elsewhere, not much has changed for the UK bar news of new quarantine measures placed on tourists coming back from Spain. Brexit talks remain in gridlock, tensions remain high with China and expectations for a US-UK trade deal have been pushed out into next year. At this stage, and without any Brexit breakthroughs, any major independent Sterling gains look unlikely.

As a result, the EUR/USD trades around the highest levels since September 2018. The weakness in the Dollar has pushed the GBP/USD up to a 4-month high. Some technical analysts feel the USD has now moved into oversold territory but there’s still lots going on to be overly confident of that. Heavy flows into the Euro have kept the GBP/EUR subdued but it trades towards the upper end of where it’s been over the past week.

Eyes will now turn towards this afternoon’s latest US growth figures (1.30pm) for further direction on the Dollar. These are the first readings of the second quarter and economists’ forecasts vary wildly which could potentially lead to some volatility later. Average expectations are for around a historic 34.1% annualised contraction.