The US dollar is trading around the morning level of 1.2040 after the release of several fundamental statistics on the eurozone, which did not help buyers of risky assets. All the focus is shifted to the afternoon and the speech of Federal Reserve Chairman Jerome Powell.
However, while everyone is preparing to once again listen to "stories" on the topic of economic recovery, inflation, the labor market, and rising government bond yields, the US Senate is entering the final stage of discussing the bill proposed by President Joe Biden for $ 1.9 trillion. Most likely, the vote on it will take place this weekend because of the warning that a new attack on the Capitol may take place today.
As recently as yesterday, Senate Majority Leader Chuck Schumer planned to begin the voting process, however, he did not have the latest redacted version of the bill, which was significantly reduced compared to the one passed by the House of Representatives last week. Judging by the changes that have been made, the Democrats are serious about passing the bill and signing it before March 14. In addition to refusing to raise the minimum wage under Senate rules, Biden agreed to soften Democrats' demands for tougher eligibility for $ 1,400 in checks, which would also affect the Congressional Budget Office's calculation of the total amount paid.
As for the attack on the Capitol, such information was leaked from law enforcement agencies. There were rumors that a group of opponents of the Democrats is planning another attack on the US Capitol. This has seriously increased tensions in Congress, forcing the cancellation of several meetings, as well as the vote on the above-mentioned bill. "We have received intelligence that points to a possible plot to breach the Capitol on Thursday, March 4," police said in a statement. Therefore, we are waiting for the denouement on the weekend. Given that the Democrats have made serious concessions, it is likely that from mid-March, many Americans will begin to receive the long-awaited aid checks for $ 1,400.
Let's go back to today. In the afternoon, Federal Reserve Chairman Jerome Powell will speak, once again trying to convince investors and traders that the Central Bank will be extremely patient in winding down its bond-buying program and supporting the economy after the end of the pandemic. Instead of trying to limit the rise in long-term Treasury yields, Powell is expected to once again point to the Fed's determination to meet its set employment and inflation targets while maintaining an ultra-loose monetary policy. Powell's statements will also try to avoid a repeat of last week's erratic bond market movements. This is important for the long-term health of the economy. The yield on 10-year US Treasury bonds has reached 1.48%, compared with less than 1% at the beginning of 2021. Wider distribution of the coronavirus vaccine and promises of increased government spending have fueled expectations of faster economic growth in the future. This will lead to a spike in inflation and force the Federal Reserve to respond by raising interest rates.
As for the current technical picture of the EURUSD pair, it has not changed much compared to the morning forecast. Sellers of risky assets have achieved a breakthrough of support at 1.2040, but that's all. The demolition of the buyers' stop orders did not happen, so a more serious incentive is needed to sell the euro, which will push the pair down to the area of the week's minimum - 1.1995. The breakdown of this level will probably increase the pressure on the pair, which will open a direct road to the area of 1.1950 and 1.1920. It will be possible to talk about taking control of the market from buyers only after fixing above the base of the 21st figure, which will lead to an instant growth of the euro already in the area of the highs of 1.2140 and 1.2190.
If we talk about today's figures, the fundamental data did not have much impact on the market. Data on construction activity in Germany, which declined sharply in February, did not lead to a strong fall in the euro. Widespread disruptions to work on construction sites due to the coronavirus have put pressure on the overall figure. According to IHS Markit, the construction purchasing managers' index fell to 41.0 points from 46.6 points in January. Finding the index below 50 indicates a reduction. Work on commercial construction projects declined at the fastest rate. Bad weather also contributed negatively to the index and sentiment.
The sharp drop in retail sales in the euro area surprised traders, as no one expected such a rapid decline in the indicator. The decline in sales was due to a rather weak turnover of non-food products. According to EU data from Eurostat, retail sales fell by 5.9% in January after rising by 1.8% in December. Economists had forecast a moderate decline in sales - by 1.1%. Sales of food, beverages, and tobacco increased by 1.1%, while sales of non-food products decreased by 12%.
Eurostat also reported today that the unemployment rate in the euro area remained unchanged in January 2021. The stability of the indicator at 8.1% indicates a faster recovery of the labor market in the spring period after the lifting of quarantine measures. Unemployment was forecast to rise to 8.3%. The number of unemployed people has increased by 8,000 since December. Compared to last year, unemployment increased by 1.010 million people.
As for the British pound, it remained trading in a narrow side channel, as sellers did not cope with their morning task. The further direction will depend on the direction in which the channel breakdown occurs. A break in the resistance of 1.3990 will lead to a new wave of growth in the pound, which will be a turning point for the downward trend - observed since February 23. In this scenario, the bulls will seek to return to the annual highs in the area of 1.4070 and 1.4130. If there is a break of the lower limit of the channel in the area of 1.3920, the pressure on the pound will return, which will quickly push it to the minimum of 1.3850, from which it is close to new levels: 1.3770 and 1.3720.
As for today's report on the UK construction sector, it returned to positive territory in February this year. According to IHS Markit and Chartered Institute of Procurement & Supply, the construction purchasing managers' index rose to 53.3 points in February from 49.2 points in January. A score above 50.0 points indicates an increase in the activity. Economists had expected the index to be 51.0 points. The residential sector remained the strongest area of growth in February. Good growth was also observed in commercial real estate.
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