The euro runs the risk of being under pressure this week. The risks for the European currency includes the publication of the protocol of the January meeting of the ECB on monetary policy as well as the output of data on consumer inflation.
It is no secret that the growth of the euro over the past few months has been based on the expectation that the ECB will cease this year stimulus measures against the background of a noticeable economic growth. Officials of the European regulator spoke directly about this and the bank demonstrated this determination with its actions. First of all, there is a decrease in the volume of assets repurchase and second, there are hints that the program will be completed in September this year.
However, the ECB has recently faced serious obstacles. First and foremost is a reduction in inflationary pressures as well as the emergence of recent economic data pointing to their decline. This situation may lead to the fact that the ECB can signal that incentive measures will not end until September but instead continue at least until the end of the year. This worries investors who are investing in the further growth of the euro.
A strong negative for it may be the contents of the protocol of the January meeting of the ECB. If it shows growing concern over the lack of positive dynamics in inflation indicators then it will affect the currency negatively. However, it is important to note that the annual value of consumer inflation is at 1.3%, which is noticeably below the target level of 2.0%. This will cause markets to doubt that the regulator will stop incentive measures in September. On this wave, the euro will be under pressure, which will only intensify if Friday's figures on consumer inflation confirm the worst expectations.
In our opinion, the risks of disappointment are very high and this can lead to a significant downward turn of the euro. This can effectively stop the upward trend, which began to form in the foreign exchange market last year.
Forecast of the day:
The EURUSD pair has overcome the 1.2400 mark on the wave of cautious attitude of investors towards the data of economic statistics coming out this week from the eurozone, as well as the protocol of the January meeting of the ECB. Any weak statistical data, as well as ECB hints that the incentive program will not be discontinued in September, will lead to a fall of the pair. Today, it can already drop to 1.2330-35.
The GBPUSD pair is falling against the backdrop of endless and ineffective negotiations on Britain's withdrawal from the EU. The weakening of the euro could also cause the sterling to fall against the US dollar. The pair has already fallen below the 1.4000 mark, which may be the reason for its further decline to 1.3835.
