Just a day after the White House promised that the coronavirus vaccine would become available in mid-December, Congress and the Senate suddenly remembered the catastrophic epidemiological situation. More precisely, not about the fact that the number of new cases of the disease is growing at a terrifying speed, but about the fact that this has led to a sharp slowdown in the pace of economic recovery. In particular, Federal Reserve Chairman Jerome Powell personally pointed this out. After that, the issue of allocating measures to support the economy, which would not budge for several months, has become the most important topic on the agenda again. So a bipartisan group of congressional and Senate lawmakers have come up with a $908 billion compromise solution. And in theory, this should have seriously inspired investors and markets, since it turns out that Democrats and Republicans are trying to come to some kind of common solution to the issue. But instead, the leaders of both parties in Congress, or the Senate, are tugging at themselves. The Democrats, who have a majority in Congress, have submitted their $2.4 trillion economic stimulus project. In response, the Republicans who control the Senate once again started talking about their project, which is much more modest, and will cost the budget only $333 billion. The piquancy of the situation is that the program of stimulating the economy must be approved by both Congress and the Senate. And since both chambers are considering their programs, then none of them can get the support of both Congress and the Senate. Consequently, the issue will not get off the ground, and the pace of economic recovery is clearly slowing down. So it is not surprising that after looking at all this madhouse, investors made the only correct decision - they began to sell the dollar.
At the same time, the euro was steadily falling before the news about the disputes between Democrats and Republicans regarding the stimulus program. It had enough reasons for this. In particular, the final data on the index of business activity in the manufacturing sector fell from 54.8 to 53.8. Which by the way turned out to be slightly better than the preliminary estimate, which showed a decrease to 53.6. But it is obvious that inflation is much more important, and the preliminary estimate turned out to be somewhat worse than forecasts. And so it was expected that deflation would continue, though slowing down from -0.3% to -0.2%. But it turned out that the rate of decline in consumer prices remained unchanged. And that's not counting the fact that deflation has been going on for the fourth consecutive month. All this may force the European Central Bank to significantly expand the quantitative easing program, which is a veiled form of monetary policy easing. This inevitably leads to a decrease in the profitability of investments, especially in government debt securities. And this despite the fact that for many of them, in Europe, they have long been giving negative returns.
The flow of negative macroeconomic data from Europe should continue today, as the unemployment rate in the euro area may rise from 8.3% to 8.5%. Even the most optimistic forecasts say that unemployment will rise to 8.4%. So the situation is clearly deteriorating, although it does not face the same difficulties as the United States. The eurozone is devoid of empty disputes and endless political battles, and various incentive programs are written out for one or two. However, unemployment continues to rise. Apparently funds are allocated for more important things than some kind of support for the labor market. Although it will not do without good news, as the rate of decline in producer prices should slow down from -2.4% to -2.0%. But against the backdrop of rising unemployment, it somehow does not look impressive.
Unemployment rate (Europe):
It's funny, but apparently, it looks like the economy doesn't need any financial support. Employment in the United States, where Congress still cannot agree on a final decision, should grow by 370,000. It increased by 365,000 in the previous month. The most daring forecasts suggest that employment may well increase by 400,000. It turns out that Europe is allocating funds, and unemployment is rising, while everyone is arguing in the United States but unemployment is falling. Some kind of grotesque satire on the topic of modern mass ideas about how the economy works. And these very ideas are actively promoted by politicians. But looking at the dynamics of employment in Europe and the United States, a thought creeps in that, in fact, this very economy works somewhat differently. In general, we should see a slight pullback today judging by the forecasts for macroeconomic statistics. Moreover, in fact, nothing new happened in the United States yesterday. Just another visual demonstration of the political mess. So today, the passions will slightly subside, and there will be much less talk about it.
Employment Change (United States):
After an intense upward move, the EURUSD pair broke through the important psychological level of 1.2000, where, against the backdrop of inertia, the quote managed to jump to 1.2085.
Volatility is off the charts, the dynamics exceeded the mark of 150 points for the first time since the beginning of the month, which indicates a high speculative interest in the market.
Based on the quote's current location, you can see a slight slowdown within the values of 1.2060/1.2080.
Considering the trading chart in general terms (daily period), we can see that when taking the recent price jump into account, the local high from September 1 (1.2011) has been updated.
We can assume that due to the high degree of overbought in the market, there may be a pullback towards the previously passed level of 1.2000.
From the point of view of a complex indicator analysis, we see that the indicators of technical instruments unanimously signal a buy, due to the rapid inertial movement and price taking higher than 1.2000.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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