- Bears yesterday control the performance of the euro-to-dollar currency pair EUR/USD after U.S. inflation was reported to be higher, adding to speculation that the Central Bank of the United States would stay on the anticipated interest rates longer, bringing the U.S. dollar stronger against the rest of the major currencies.
According to the results of the economic calendar, the annual inflation rate in the United States fell last month but remained high in the latest sign that the price rise fueled by the pandemic can be controlled only gradually and intermittently. Tuesday's report from the U.S. Department of Labor showed that the consumer price index rose 0.3 per cent from December to January, compared with an increase of 0.2 per cent in the previous month. Compared with last year, prices rose by 3.1 per cent. This is lower than the 3.4 per cent figure in December and well below inflation's peak of 9.1 per cent in mid-2022. However, the latest reading remains well above the 2% target set by the U.S. Federal Reserve, at a time when public frustration with inflation has become a central issue in President Joe Biden's bid for re-election.
Biden administration officials say U.S. inflation has fallen sharply since disruptions in pandemic-related supplies and substantial government aid led to a increase three years ago. A wide range of forward-looking statements indicate that inflation will continue to slow. However, even as it approaches the Fed's target level, many Americans remain angry that average rates are still about 19 percent higher than when Biden took office
On the eurozone front, investors' expectations in Germany improved for the seventh month more than expected - offering hope that the worst may be over for Europe's largest economy as slowing inflation paves the way for interest rate cuts. According to the announcement, the ZEW Institute's expectations index rose to a reading of 19.9 in February from a reading of 15.2 in January — exceeding economists' average estimate of 17.3 in a Bloomberg survey. The result came even as a measure of current conditions fell to its lowest levels since mid-2020.
Germany was the only G7 country whose economy contracted last year due to the decline in the main manufacturing sector, weak foreign demand and the repercussions of the inflation shock. A growing number of analysts - including those at Deutsche Bank and Commerzbank - are expecting another contraction in 2024. With the emergence of a more flexible monetary policy, some remain optimistic. Wolfgang Schmidt, a close aide to Chancellor Olaf Scholz, said the first signs were beginning to emerge of a consumer-led recovery, with more tailwinds emerging from initiatives at the national and regional levels to reduce the routine.
“We don’t have a recession,” he said at an event organized by a local business lobby group in Berlin. “We are not seeing anything that usually accompanies a recession – like unemployment. The labor market is very stable, and real wages are rising again. “We will see growth this year.” A separate survey conducted by Bloomberg indicates that German GDP will fail to grow again between January and March, compared to previous expectations of an advance of 0.1%. The German central bank was more pessimistic, describing a recession in the first quarter as a “best-case scenario.”
Anything less would mean Germany's first recession since the pandemic.
Forecast Euro Dollar Today:
According to the performance on the daily chart above, the bears control the trend of the currency pair price (EUR/USD) against the US dollar is getting stronger and if it continues to move downwards, the following support levels may be 1.0650 and 1.0580 stations, which in turn will move technical indicators towards strong saturation levels, including the best buy but no risk. In contrast, the current downward trend on bulls broke off to a higher resistance of 1.0875 over again. Today, it will be announced that the growth of the eurozone's gross domestic product (GDP), the change in employment and the rate of industrial output growth will be read. There is no significant U.S. data, but it must be borne in mind that the impact of the latest U.S. inflation figures will affect the course of the euro pair in the coming days.
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