Fundamental analysis of the euro Sunday, April 18

Fundamental analysis of the euro Sunday, April 18

The coming week is very important for euro traders. This week we have the European Central Bank (ECB) interest rate determination meeting and PMI indicators. The European Central Bank is not expected to change its monetary policy (interest rate and purchase plan). However, the views of the head of the European Central Bank are expected to influence the market.

The head of the European Central Bank recently said that expansionary monetary and fiscal policies will continue until the eurozone economy recovers fully. Several European Central Bank officials agree with the central bank governor. However, two European Central Bank officials (Hozmann and Knot) have called for a halt to the asset purchase program in 2021. This means that there is a serious disagreement in the European Central Bank. According to the fundamental analysis, the euro will strengthen sharply if the head of the European Central Bank changes his mind and agrees to a gradual exit from expansionary monetary policy.

At the same time, the speed of vaccination against Corona has slightly increased and the European Union will receive 50 million Pfizer vaccines in the second quarter of 2021. Investment banks Goldman Sachs and ING are also optimistic about the growth of the EURUSD. However, some analysts worry that the recent growth of the euro may have been rapid. According to them, the trend of economic recovery in the euro area is still not in line with the rapid growth of EURUSD. The $ 1.20 resistance is a key and important level for the market and can trigger a bearish correction.

New euro area PMI data will be released at the end of the week, following the European Central Bank's interest rate meeting. The manufacturing, service and hybrid PMI are expected to be lower than the March data. Euro quarantine and coronary restrictions are the cause of this pessimism. But if the eurozone's economic data outperforms market expectations, the euro will strengthen against the dollar.

Fundamental analysis of the euro Tuesday, March 9

Fundamental analysis of the euro Tuesday, March 9

Last week, almost all European Central Bank officials warned that the ECB should respond to rising bond yields. The growth of European bond yields is due to investors' fear of inflationary pressures that will emerge after the recovery of the global economy. From a fundamental analysis point of view, it is very unlikely that the European Central Bank will reduce interest rates or tighten expansionary monetary policy at this week's interest rate meeting. But the recent jump in European bond yields (especially the 10-year German government bond yields) could force the European Central Bank to make a small change in monetary policy and perhaps increase bond purchases to prevent further growth in bond yields. Give. The slope of the German government bond yield curve has recently widened, worrying European monetary policymakers.
A member of the board of the European Central Bank (Fabio Panetta) said last week that the sharp rise in the yield curve is an unfortunate event that the European Central Bank should stop growing as soon as possible by increasing the volume of bond purchases. The head of the French central bank also said that the rise in bond yields is unjustifiable and the European Central Bank (ECB) must deal with it. Most members of the European Central Bank seem to agree with the increase in the volume of bond purchases under the PEPP program.
Undoubtedly, the increase in the volume of bond purchases by the European Central Bank will be to the detriment of the EURUSD currency pair. Data on the volume of European Central Bank bond purchases will be released on Monday. On the other hand, if the volume of bond purchases does not change, the euro will strengthen. In that case, the euro trend will depend on the words of the head of the European Central Bank.

Fundamental analysis of the euro area economy

Fundamental analysis of the euro area economy

The European Central Bank (ECB) held a meeting last week without any changes in monetary policy. However, members of the European Central Bank are expected to prepare the market for monetary policy changes in the coming weeks. At present, the European Central Bank deposit rate is negative 0.5 percent and it is clear that there is no room for further interest rate cuts. In terms of the market, the chance of interest rates falling to minus 0.6 percent by the end of 2021 is almost 70 percent. However, if the European Central Bank officials point to a reduction in interest rates in the coming days, the euro will weaken. However, the downward movement of the EURUSD pair may be limited.
From a fundamental analysis point of view, lower interest rates could not have a significant positive effect on the euro area economy. In addition, the European Central Bank has focused on the fluctuations of the EURUSD currency pair. If the euro strengthens, the eurozone's economic recovery will be hampered. But a weakening euro could support the eurozone's export-oriented economy. The fact of the matter is that the European Central Bank is a long way from intensifying monetary expansionary policies, and the market knows this. In addition, the European Central Bank opposes the strengthening of the euro. Therefore, perhaps any change in interest rate expectations will have a limited effect on the EURUSD pair.
As interest rate expectations do not have a significant impact on the market, euro area economic data is expected to have a similar effect. However, new euro area GDP data will be released this week. Below are the inflation data. At the end of the week, the final assessment of PMI, unemployment rate and retail index will be published.