Anna Zaitseva, analyst, FINAM Group
On Friday, March 12, EUR / USD traded down 0.20% at 1.19580, after gaining 0.49% a day earlier. The DXY dollar index is up 0.23% to 91.63 after falling to 91.418 the day before, the lowest since February 4.
The key event of yesterday was the ECB meeting, following which the regulator kept the base interest rate unchanged at zero. Interest rates on short-term ECB loans and deposits also remained at the same level – 0.25% and -0.5%, respectively. The central bank also announced that it will continue to buy out bonds under the PEPP program in the amount of 1.85 trillion euros at least until the end of March 2022 or until it decides that the economy has completely overcome the crisis. At the same time, the ECB decided to significantly increase the rate of bond purchases in the next quarter in order to discourage the growth of bond yields and ensure a low cost of borrowing for businesses and the public. In addition, the regulator will continue operations under the APP asset repurchase program in the amount of 20 billion euros per month and the long-term liquidity program for European banks TLTRO III. It should be said that the European bond market reacted with a decrease in yields to the results of the ECB meeting.
In addition, yesterday Joe Biden signed a bill on new fiscal stimuli for the US economy in the amount of $ 1.9 trillion, which supported the risk-on sentiment in global markets and reduced demand for the dollar.
Also yesterday, an auction was held to place 30-year US Treasury bonds worth $ 24 billion. In general, the auction was successful – demand was quite high, but the yield on the new issue was 2.295%, which is 36.2 bp. p. above the results of the February placement. Also, following the auction, a significant decrease in demand from foreign investors was noted. Earlier this week, there were $ 38 billion 10-year USTs with lower yields and $ 58 billion 3-year notes with a higher yield compared to the February results. At the same time, yesterday and today, the yield on US Treasuries continues to grow, again approaching the highs of the last week.
Thus, the multidirectional dynamics in the yields of European and American government bonds will be an obstacle to the strengthening of the single European currency in the near future.
With regard to macroeconomic statistics, in the United States yesterday became known weekly data on the number of initial applications for unemployment benefits. According to the results of the week ended March 6, the value of the indicator was 712 thousand, which was the lowest value since November last year and turned out to be better than the consensus forecast of analysts in 725 thousand.You can also note the data on the number of open vacancies in the labor market from JOLTs: in January the figure rose to 6.917 million against 6.752 million a month earlier, while analysts expected a decrease to 6.6 million.
Today it will be necessary to pay attention to the publication in Germany of inflation data, in the eurozone – on industrial production, and in the US – on the producer price index and a number of indicators from the University of Michigan.
The EUR / USD pair reversed downward, just short of reaching the 1.2000 level. Stochastic lines are still directed upwards, but their growth is slowing down, which may be a sign of the end of the corrective growth of quotations.
This information is not investment advice.