Demand for risk assets declined yesterday on the news that G20 leaders are considering raising taxes of large corporations. As a result, the euro did not consolidate above 1.1890, which could accordingly result in a downward correction this weekend. To add to that, the latest Fed minutes gave support to the US dollar, as investors are reminded that the central bank will not rush to change its monetary policy.
Therefore today, the key level in EUR / USD is 1.1890, and a break above it will set off a larger jump towards 1.1930 and 1.1990. But if the euro drops to 1.1860, the price will collapse to 1.1828 and 1.1795.
Going back to the G20 meeting, it was the United States that proposed to raise rates for many technology companies. But whether this will be approved is still uncertain because further discussions on the issue is needed. Most likely, the final decision will be available by the middle of the year.
At the meeting, many finance ministers and central bank governors said they are open to serious changes in tax rates. This is because higher rates mean more government income, which they need in order to revive their economies. But there are also some who are against the plan because it could lead to corporations looking for new tax havens in other countries.
In any case, US Treasury Secretary Janet Yellen already outlined plans to increase tax from 12.5% to 21%. She claims that this will make rates fairer for both small and large companies, as well as on the rich and the poor.
On a different note, G20 members approved the extension of the Debt Service Suspension. They also supported the IMF's plan to raise financial resources in order to help the countries hit hardest by the COVID-19 pandemic.
In a published report, the IMF said they are actively discussing how to provide support to middle-income countries, as according to Managing Director Kristalina Georgieva, they are the ones that entered the pandemic with weaker economic performance, higher debt levels and a tight budget. Georgieva also mentioned that many countries are dependent on the tourism business, which, to date, needs special assistance.
Yesterday, the Federal Reserve also published the minutes of its last meeting, according to which the monetary policy will not change any time soon. Economic forecasts for the United States have also improved, but they may change in the future because of the uncertainty associated with the coronavirus pandemic.
The Fed also revealed that the risks of upward inflationary pressures are higher, but they are still balanced and do not cause concern. And to date, the economy has not yet returned to pre-crisis levels, which is probably why the central bank continues to insist that changing policies right now is a bad idea.
With regards to macro statistics, the US Department of Commerce said trade deficit grew higher than expected, increasing from $ 67.8 billion in January to $ 71.1 billion this February. According to the report, this is mainly due to the 2.6% decline in exports, which is to only $ 187.3 billion. Imports, meanwhile, fell by 0.7% and reached $ 258.3 billion.
Today, Germany will release its data on production orders, which economists project to increase by approximately 1.2%. After that, France will publish a report on trade deficit, followed by PMI data from Germany and the UK.
In the afternoon, Eurostat will publish producer prices in the euro area, which economists predict to rise by 0.6%. Following it is a report on US jobless claims, as well as a statement from the Federal Reserve, which may strengthen the position of the US dollar.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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