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The new target for EUR is 1.2500. Is this a red button for the ECB?



DATE OF PUBLICATION: 2021-02-26 09: 06: 06Lately, the European currency has slightly receded into the shadow of the American one, although both assets have weight in the world financial arena. While the dollar was solving its problems associated with total weakening, the “European” tried to maintain its current positions. The dynamics of the single currency changed depending on macroeconomic data, primarily from Germany. The latest reports from Germany have supported the EUR, strengthening its position. According to the statistics, in March 2020, the consumer confidence index in the German economy rose to minus 12.9 points from the revised February estimate (minus 15.5 points). Inspirational reports on the German economy for the fourth quarter of 2020 provided additional help for the “European”. It grew by 0.3%, and the driver of this recovery was the growth of investments and exports. This minimized consumer and government spending in Germany, experts emphasize. In the fourth quarter of last year, investments in fixed assets increased by 1%, and the volume of exports – by 4.5%. At the same time, consumer spending in Germany decreased by 3.3% amid renewed restrictions due to COVID-19. The current situation became the “fuel” for the growth of the European currency. On the evening of Thursday, February 25, the “European” has risen in price in relation to the greenback, soaring to a maximum since the beginning of January 2021. By the end of the Thursday session, the euro against the dollar rose to $ 1.2239 from the previous $ 1.2164. During yesterday’s trading, the EUR hit a record high of $ 1.2240. However, the joy was short-lived: by Friday morning, the “European” had lost some of his achievements. At the start of trading on the last day of the week, the EUR tried to catch up, but to no avail. On Friday morning, February 26, the EUR / USD pair was trading near 1.2153-1.2154. Note that in recent weeks the tandem has been running in a wide range of 1.1950-1.2350, and this trend continues. The European currency once again took advantage of the weakness of the American one, not missing a chance to grow. However, excessive strengthening of the “European” is not included in the ECB’s plans. It is a wake-up call for the regulator, currency strategists at BNY Mellon say. At the same time, ECB officials are more concerned about the growth rate of the EUR, and not about the specific levels of the EUR / USD currency pair. Analysts at BNY Mellon believe that when the regulator reaches 1.2500 by the March meeting, the regulator will make every effort to weaken the euro. At the moment, commodity and bond markets are at the peak of popularity. In this regard, the ECB is closely monitoring the financial climate in the euro area. According to Philip Lane, the regulator’s chief economist, the agency is using the purchase of bonds to prevent the situation from getting worse. On Thursday, after F. Lane’s statements, the sale on the European bond market stopped, but later resumed. At the same time, the yields of Eurobonds continued to grow. In the near future, the regulator is ready to soften financial conditions that are incompatible with the COVID-19 countermeasures. They have a negative impact on the projected inflation dynamics in the eurozone, stressed F. Lane. Recall that one of the negative factors hindering the achievement of the inflation target of 2%, the ECB refers to the strengthening of the euro. Another significant trigger for the dynamics of the EUR / USD pair may be the approval of a new package of fiscal measures in the US in the amount of $ 1.9 trillion. A decision on this issue is expected on Friday, February 26th. If the full package of assistance is approved, inflation could be accelerated, experts warn. This is facilitated by the next inclusion of the printing press in the United States. The implementation of such a scenario can “inflate” the stock market to incredible proportions. Fearing this, many investors exit the USD. In case of such a development of events, the “American” will fall into the millstones of the financial market, risking to be under the pressure of the sharply growing money supply. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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