Market Analysis – EURUSD
The EURUSD declined throughout yesterday’s trading day and continues to decline so far during today’s Asian Session. Yesterday’s decline measured approximately 55 pips which is a 160% correction of the previous day’s price movement. The movement this morning is yet to build any significant momentum in a specific direction as the market awaits for a clear trend or price drivers to develop.
Investors are focused on the comments of the US Federal Reserve officials, according to which, the market is trying to predict further actions of the regulator in the medium to longer term. Yesterday, the Deputy Chairman of the Regulator, Richard Clarida, said that the department would be able to cope with growing inflation without undermining the recovery of the US economy. San Francisco Fed President, Mary Daly, noted that while economic growth was encouraging, it was too early to talk about monetary tightening. Like most other officials of the regulator, Daly considers the current rise in inflation to be a temporary phenomenon. Prices should decline as soon as demand stabilizes according to reports. As long as the labor market remains challenging and the US is short of 8M jobs, the current soft monetary policy is relevant. On Thursday, Republican senators promised to present their infrastructure modernization plan, different from the projects of the current administration. It will cost about $1Trillion which is much lower than the proposition of the Democrats, but at the same time there will be no tax hikes planned for its implementation.
Due to a lack of significant economic releases in the Eurozone, the movement of Euro, generally speaking, was mainly technical except for the EURUSD which was also largely driven by the appreciating Dollar. Several European Central Banker officials, like their American counterparts, declared the need to maintain the current soft monetary policy. The ECB board member Fabio Panetta said that the regulator should not slow down the pace of asset purchases since the economic recovery was still at an early stage. Yesterday, the Governor of the Central Bank of Greece, Yannis Stournaras, noted that there were no signs that inflation will reach significant levels soon, so there is no need to reduce bond purchases. The Eurozone continues a legal dispute with AstraZeneca, trying to force it to fulfill its contractual obligations for the supply of vaccines, which should allow accelerating the vaccination of the population. Eurozone lawyers have asked a Brussels court today to impose a large fine on AstraZeneca for delaying the delivery of the vaccine.
Looking at the movement of the currencies individually, we can see the US Dollar strengthened in the market as the US Dollar Currency Index increased back above 90.00 before slightly retracing during this morning’s session. The Euro on the other hand declined against its main competitors yesterday, but today has seen a slightly better performance so far. So far today we can see the Euro has increased in value against the Pound, Yen, and Franc, but has declined against the Australian and New Zealand Dollar.
In addition, today investors will pay attention to the publication of statistics on the dynamics of jobless claims, which may again turn out to be optimistic. Also the head of the US Treasury Department, Janet Yellen, will speak; who is still expected to take action aimed at gradually tightening monetary policy in the country. In turn, noteworthy statistics from the Eurozone will appear tomorrow, when the data on business sentiment for May is released. Thursday will be marked only by the speeches of the Vice President of the European Central Bank, Luis de Guindos, and the member of the ECB Executive Board, Isabel Schnabel.