The euro failed to regain its position against the US dollar in the first half of the day today after the recent verbal interventions by representatives of the European Central Bank, which were aimed at preventing further growth of the exchange rate. However, this approach is unlikely to lead to a reversal of the medium-term upward trend of risky assets. The market already estimates a 70% chance of a further 10 basis point cut in the deposit rate at the next meeting of the European Central Bank. Therefore, all recent statements are only limited in nature and are unlikely to seriously affect the strengthening of the EUR/USD this year. The strength of the euro and the weakness of the US dollar will continue to push the trading instrument up. Several stimulus programs that lead to the pumping of the US economy with money will continue to erode the position of the US dollar against several other world currencies.
Today, a report was released, which indicated that consumer sentiment in the eurozone remained at a fairly low level. In January, economic sentiment continued to decline due to problems in the retail and service sectors, as measures to contain COVID-19 will remain in force until at least mid-February this year.
According to the report of the European Commission, the index of economic sentiment fell to 91.5 points from 92.4 points in the previous month. The index of confidence in the industry rose to -5.9, and the index of sentiment in the service sector fell even more (to -17.8 points from -17.1 points in December).
The consumer confidence index (on which the maximum emphasis is placed by investors) coincided with the preliminary estimate and amounted to -15.5 points, but decreased compared to December when it was at the level of -13.8 points. The report indicates a deterioration in the assessment of households' expectations of economic growth and their financial condition.
The data once again confirms the likelihood that the eurozone economy will contract again in the first quarter of this year, leading to a double recession. Until the coronavirus epidemic is fully brought under control, it is unlikely to count on more active recovery.
Traders were pleased with the data from the statistical bureau Destatis, according to which consumer prices in Germany in January this year rose sharply, being better than economists' forecasts. According to the report, on an annualized basis, consumer prices rose by 1.0% against the forecast of economists, who expected the indicator to increase by 0.7%. As for the harmonized index of consumer prices, it increased by 1.6% year-on-year. The main jump in prices occurred against the backdrop of the cancellation of a temporary VAT cut in Germany, which the authorities used to help businesses affected by the coronavirus pandemic. The increase in the minimum wage also contributed to the strengthening of the index.
Every month, consumer prices rose by 0.8% in January compared to December 2020. Economists had predicted that prices would rise by 0.4%.
Data on the Italian consumer confidence index for January of this year did not affect the quotes of the EURUSD pair. According to the results of the latest survey of the Istat statistical office, the consumer confidence index fell to 100.7 points in January, compared with 101.1 points in December. Economists had expected the index to be 100.5 points.
As for the technical picture of the EURUSD pair, it did not change much, as the volatility remained at a fairly low level. Only a break in the support of 1.2060 will increase the pressure on the trading instrument and push it into the area of 1.2020 and 1.1980. It will be possible to talk about the return of control over the market by the bulls after EURUSD breaks out of the resistance at 1.2120, which will lead to a larger recovery of the pair in the area of the high of 1.2170, and then to a larger resistance in the area of 1.2020.
