Contrary to what was expected, the latest data on US inflation did not cause significant changes in the market, since the figures completely coincided with the forecast of economists. But core inflation did drop altogether, which led to the strengthening of risk assets against the US dollar.
On a separate note, the US Congress passed the $ 1.9 trillion bailout bill yesterday, so now, all that is needed is President Joe Biden's signature. He is expected to sign it this Friday.
The new economic support is a major political victory for the new US president, as it demonstrates his influence over the Democratic Party that controls the Congress.
Yesterday, Treasury Secretary Janet Yellen spoke about the new bill and said it would help weather the crisis the US economy is currently facing.
"The new aid package will provide a good foundation for building a better future after the coronavirus pandemic," Yellen said.
However, the market did not react to the good news, which suggests that traders have long ago switched to a more important issue: the meeting of the European Central Bank. During this conference, members will announce new forecasts for EU GDP and inflation, as well as make decisions on the monetary policy. Many expect the ECB to revise its current stimulus program and expand the timing and scope of its PEPP emergency bond buying program. As for the economic forecasts, huge revisions are not anticipated since the projected surge in consumer prices early this year is temporary. Such a large increase is not really expected in the following years.
ECB members shall also decide on how they will deal with the growing bond yields, as such could seriously harm the region's economic recovery. That said, economists predict that bond buying volumes will be raised in an attempt to influence yields.
All these will certainly affect the rate of the euro. Specifically, if there are no changes in the monetary policy, then, most likely, the bear market will continue. The same shall happen if the ECB only slightly intervenes in the stimulus program. But if the regulator announces significant changes on its policy, EUR / USD should resume its upward trend in the market.
In that regard, a lot depends on 1.1950, as a break above it will trigger a further climb towards the 20th figure, and perhaps to 1.2050 and 1.2090. But if the quote returns to 1.1890, EUR / USD will drop to 1.1835.
Going back to US inflation, consumer prices last February rose by 0.4%, as predicted by the US Department of Labor. The main impetus for this growth is the sharp jump in oil and gasoline prices, which increased by 6.4% in February. As for core inflation, which excludes food and energy prices, consumer prices grew by only 0.1%, a bit lower than the projected 0.2%. And on a yearly basis, consumer prices shoot up by 1.7%.
With regards to base prices, growth slowed from 1.4% to 1.3%, which reassured the Federal Reserve.
Tomorrow, another important report will be published, but this time it is on producer prices, which are expected to increase by 0.5%.
GBP
A dispute arose between the EU and UK this week, when European Council President Charles Michel accused London of imposing a direct ban on the export of coronavirus vaccines to EU countries. But yesterday evening, representatives from the European Commission agreed that the UK did not impose such a ban, and said the statements made by Michel were on a completely different point. It turns out that Michel just wanted to know how much vaccine was exported from the UK, since it is important to know such details to form an overall picture of the joint efforts to counter COVID-19. "We know that different volumes of export vaccine production are approved. But we also know for sure that we are a very active exporter of vaccines, while our partners have slightly different views, "Michel said.
To date, a total of 34 million doses of COVID-19 vaccine have been exported from the EU to various countries. About 9 million doses have been shipped to the UK alone, while about 1 million doses have been shipped in the United States.
With regards to the GBP/USD pair, a break above 1.3920 will trigger a further jump towards the 40th figure and 1.4060, while a return to 1.3920 will increase pressure on the pound and set off a drop towards 1.3850 and 1.3780.
