The euro and the sterling continue their recovery against the US dollar, but it is all happening very slowly. Eurozone and U.S. bond yields have stabilized slightly, and the inflation data dispelled investors' expectations of a larger increase in consumer prices earlier this year in the United States, which could theoretically lead to an earlier increase in interest rates.
However, it is still too early to say that the trend for the strengthening of the US dollar has been broken or that the strength has returned to the euro. The active growth of the U.S. is just beginning: most likely, throughout the first half of this year, we will observe the permanent strengthening of the dollar as an asset that can provide investors with higher returns than the euro. At the very least, the strengthening trend will continue until the moment when we hear talk about the curtailment of stimulus measures in developed countries after the final victory over the coronavirus pandemic.
In the meantime, while the European Central Bank is busy preparing for tomorrow's meeting, Prime Minister Boris Johnson criticized the EU, or rather, intervened in a bitter dispute between the UK and the European Union over the vaccine. The EU states that the UK has completely blocked the export of vaccines to the EU countries, acting out of its own interests. Johnson gave a rather eloquent response to the President of the European Council Charles Michel, who on Tuesday accused London of imposing a direct ban on the export of the coronavirus vaccine. His accusations prompted the British government to respond with accusations against EU politicians: they alone are guilty of such a slow deployment of the immunization program for the population in the eurozone, and no one else.
During his speech in the UK Parliament on Wednesday, Johnson said he wanted to "correct" Michel. "Let me clarify that we have not blocked the export of any vaccine or components to it. We are opposed to countries using the coronavirus vaccine only in their own interests," Johnson said.
The scandal risks spoiling relations between the EU and its former member state, which are embroiled in a broader dispute over Brexit trade rules. In the end, all this can lead to a lawsuit by one of the parties. Recently, the eurozone has been repeatedly criticized for the slow roll-out of its own vaccination program: according to Bloomberg, about a third of the UK population received a dose, compared with 6% in the EU.
It is worth saying that Boris Johnson's indignation has several reasons. For example, the statements by Charles Michel, reflected in a newsletter published on Tuesday, were made exactly one week after Italy blocked the supply of AstraZeneca Plc coronavirus vaccines to Australia. The EU exported 25 million doses to 31 countries last month, with the UK and Canada receiving the most, according to the New York Times.
As for the technical picture of the GBP/USD pair, the bulls' accent on the resistance level of 1.3920 did not justify itself, as it was not possible to get above this range again. Thank you for not missing the 1.3850 mark in the first half of the day. Only the breakout of 1.3920 will provide a direct way for the pound to the base area of the 40th figure, and further to new highs in the 1.4060 mark. Pressure on the pound will return only after the bears break below support at 1.3850, opening a real prospect for a return to monthly support at 1.3780.
As for the technical picture of EUR/USD, the expected movement of the euro did not happen in the first half of the day, which left everything in its place. A breakthrough of the 1.1905 level seems to have happened, but we did not see any active purchases from this range. Buyers' challenge is to close the day above this range, opening a straight path to the highs of 1.1960 and 1.2000. If the bears manage to take control of the support level at 1.1905, most likely, the pressure on risky assets will return, which will quickly push the pair to a minimum of 1.1855, below which a direct road opens to the area of the base of the 18th figure and even lower to 1.1750.
As for fundamental statistics, the euro was supported in the first half of the day by data on industrial production in France, which recovered strongly in January this year. Industrial production rose 3.3% in January after falling 0.7% in December 2020, according to statistics bureau INSEE. Economists had a forecast growth of 0.5%. Particularly noteworthy is the strong growth in manufacturing output, which also rose 3.3% from a 1.4% fall in December. Compared to February 2020, the last month before the first general lockdown in the economy, industrial production remained 1.7% lower.
Italian producer prices continued to decline in January 2021, but this did not affect the market in any way. According to the statistics bureau ISTAT, the PPI dropped 0.3% year-on-year after falling 1.8% in December. On a monthly basis, producer prices rose 1.4% after rising 0.5% in the previous month.
