Recent statements from the Federal Reserve did not affect the forex market, but provided sufficient support to the US stock market. Fed Chairman Jerome Powell, speaking to members of the Senate Banking Committee, said the central bank will continue to support an ultra-soft monetary policy. To put it more precisely, the Fed will keep interest rates near zero and leave the current bond purchase program at the same level. All of these measures will continue until "substantial progress" is achieved. For example, if the US already reaches the target employment and inflation levels.
Regarding government bonds, concerns on the outlook for inflation have helped boost Treasury yields. As a result, 10 and 30-year bond yields hit their highest levels for the first time since the early days of the coronavirus pandemic. Of course, this is not good news for the Fed.
A similar situation is observed in the Euro area. During her last speech, European Central Bank President Christine Lagarde said she is closely monitoring the bond market, and noted that she could take measures to prevent a rise in yields. Lately, these are growing because investors are expecting a huge economic recovery amid the release of COVID-19 vaccines. They expect consumer spending to surge, which will accordingly lead to an increase in inflation and interest rates. However, the rise in profitability hurts the pace of economic recovery since it increases the cost of financing for the debt burden of the public and private sectors.
Powell also said the recent rise in consumer prices is temporary and is more related to the recovery of prices in individual sectors of the economy. Meanwhile, the areas most affected by the pandemic are not showing such growth, which will limit inflationary pressures, at least until economic activity is fully restored. He also mentioned that progress in vaccination should help accelerate the return to normal activities, but in the meantime, it is necessary to continue following the advice of health experts and observe social distancing measures.
In another note, the US House of Representatives will vote on the proposed $ 1.9 trillion bailout bill on Friday, but the main snag is that Democrats may not be able to push an increase in minimum wage. To date, there is disagreement among Democrats, not to mention Republicans, who are generally not happy with the new aid program.
In terms of macro statistics, the latest data indicated that US consumer confidence has risen to much better level than expected. According to the Conference Board, the index rose to 91.3 points this February, up from the projected 90.0 points. The growth was mainly due to a strong current situation index, which jumped to 92.0 points this month, from 85.5 points earlier.
These figures suggest that economic growth will continue and not slow, unlike the previous months. Unfortunately though, the index of expectations has decreased, dropping to 90.8 points in February, from 91.2 points in the previous month. The decline is most probably due to concerns associated with the delay in the adoption of new economic stimulus. But nevertheless, in general, consumers are cautiously optimistic on the outlook for the coming months.
As for EUR/USD, the technical picture is still the same. Although the euro has dropped a bit, the market remains in favor of the bulls. In fact, to continue the bull market, traders just need to push the quote above 1.2180, as such will lead to a new upward wave towards 1.2220 and 1.2260. There is also no need to panic if the euro falls slightly, since 1.2135 will act as a strong support. And even if this area is broken down, long positions will still increase, especially around 1.2090.
Recent COT report also showed that long non-commercial positions have risen from 220,943 to 222,895, while short non-commercial positions increased from 80,721 to 82,899. All in all, the total non-commercial net position fell slightly from 140,222 to 140,006. The weekly closing price was also at 1.2132, which indicates the presence of buyers in the market.
