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02.03.2021: Drop in EUR and GBP may slow down. Outlook for EUR/USD and GBP/USD.

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Fears of pessimists did not come true, as the eurozone inflation did not drop. In fact, in February, the eurozone consumer prices showed the same advance as a month earlier. In our video review on InstaForex TV channel, we will find out how traders reacted to the recent data and how it changed the currency market situation. According to the preliminary estimates provided by Eurostat, in February, the eurozone inflation totaled 0.9%. However, in the morning, analysts expected a rise up to 1.0%. Such hopes were caused by a significant jump in Germany’s inflation. However, lower inflation in France and Spain offset a surge in the eurozone largest economy. Nevertheless, there are still risks that deflation may replace inflation again. Germany’s retail sales report supports these concerns. The indicator slumped by 8.7% on a yearly basis after an increase of 2.8%. That is why investors are looking forward to the eurozone retail sales figures that are slated for release on Thursday. The fact is that the recent rise in consumer prices immediately led to a tumble in consumer demand. As a result, companies’ income is falling, thus leading to higher inflation. To settle the situation, retailers will have to lower output prices. This means that consumer prices may drop again in the future. At the same time, unemployment is likely to climb. In this case, the eurozone economy will hardly get back on track. That is why markets showed such an insignificant reaction to the eurozone inflation report. The euro/dollar pair dropped to the psychological level of 1.2000, where the volume of short positions usually declines. If this happens again, the price may rebound towards the level of 1.2100. According to the alternative scenario, the correctional movement, which began in January, is likely to continue. This forecast will come true, if the pair fixes below 1.1980 on the four-hour chart and breaks the local low of 1.1952 logged on February 5. At the same time, the pound/dollar pair goes on falling from the peak of the mid-term trend located at 1.4224. Market participants have already hit a fresh low of the previous week. If the pair continues losing in value, the pound sterling may slide to 1.3750.

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