Anna Zaitseva, analyst, FINAM Group
On Thursday, January 21, the single European currency strengthens against the US dollar by 0.24% and is trading at 1.21350, while the DXY dollar index is down 0.24% to 90.252. On the eve of the EUR / USD rate fell by 0.16%, while the DXY index fell by 0.25%.
The key event of yesterday was the inauguration of the 46th President of the United States Joe Biden, which was well received by market participants. Thus, American stock indices set new records, while the US dollar recorded a decline. In his address to the nation, Biden noted that the threat from the coronavirus remains very high, and the worst times for the country are yet to come. At the same time, the approval of a new package of fiscal support for the US economy in the amount of $ 1.9 trillion is expected soon, which should smooth out the negative effects of the pandemic.
If we talk about how the coming to power of Biden can affect the dynamics of exchange rates, it is worth recalling that the nominee for the post of US Treasury Secretary Janet Yellen supports the new president’s course in terms of increasing government spending. According to Yellen, the positive effect of stimulating the economy will outweigh the negative effects of an increase in public debt, especially in conditions of close to zero interest rates. At the same time, Yellen expressed a critical attitude to the policy of weakening the dollar rate during the previous administration and supported the idea of a completely market-based formation of the national currency rate.
In terms of macroeconomic statistics, data on the producer price index became known in Germany yesterday. At the end of December, the indicator increased by 0.2% (yoy) compared with a fall of 0.5% (yoy) a month earlier, while analysts had expected a decline of 0.3% (yoy).
Also in the eurozone were released the final December inflation data. The final estimate did not change compared to the preliminary one and remained at the level of -0.3% (y / y), as in November.
Today the focus will be on the ECB meeting. According to its results, no change in the key rate is expected, but the comments of the bank’s management on the current state of the European economy and their forecasts for the rate of economic growth in the region will be of interest. Also today in the United States will be released data on the number of initial applications for unemployment benefits, the number of building permits issued, the volume of new home construction, the index of business activity in the manufacturing sector from the Federal Reserve Bank of Philadelphia. In the eurozone, data on the consumer confidence index will become known.
EUR / USD continues to consolidate below the level of 1.2150, where the 50-day moving average line also lies. Stochastic lines are located near the oversold zone in a favorable position for purchases, which testifies to the growth of the instrument in the short term. If the level 1.2150 is exceeded, the next local resistance will be the level 1.2200.
This information is not investment advice.