Demand for the US dollar swelled after the Federal Reserve addressed the issue on rising inflation.
According to Fed Chairman Jerome Powell, prices should begin to rise when COVID-19 recedes and Americans can already go out and spend their savings. "We expect inflation to jump this year, but its impact will not be that large nor permanent," Powell said.
Further observations may be revealed today, when other Fed representatives speak in front of the Senate Banking Committee.
US Treasury Secretary Janet Yellen will also give her assessment on the government support measures today, especially since many expect the vaccination programs, as well as President Joe Biden's $ 1.9 trillion stimulus package, to set off a stronger and faster economic recovery this summer. In fact, even the Federal Reserve revised its forecasts towards a significant increase.
On a different note, the International Monetary Fund (IMF) announced yesterday that it intends to create additional reserve assets worth $ 650 billion. Their latest goal is to help developing countries in their fight against the coronavirus pandemic.
More specifically, the committee is preparing requirements to improve the transparency and accountability of the funds used. Then, in the future, countries with strong financial positions will be asked to approve a reallocation of reserves, which will be channeled to support more vulnerable and low-income countries. "If the new program for the distribution of funds is approved, this will add liquidity to countries in need of assistance without increasing their debt burden," Kristalina Georgieva, managing director of the IMF said. "It will also help free up additional resources for member countries that are less effective in coping with the coronavirus pandemic."
With regards to macro statistics, the US Department of Commerce pointed to a sharp drop in new home sales this February. They revealed a sharp 18.2% decrease in sales for primary homes, much higher than what analysts expected. Average home price also declined by 1.1%.
Sales of second homes also fell much more than expected. The National Association of Realtors (NAR) said the figure dropped by 6.6%.
Talking about the coronavirus, many European countries reimposed quarantine measures last week after cases surged again. And yesterday, Germany decided to implement strict isolation measures during Easter in order to control the spread of the virus in the country. German Chancellor Angela Merkel said shopping malls, grocery stores and other establishments will be closed from April 1. Churches should conduct prayer services online, and grocery stores will be allowed to open only on April 3. Meanwhile, non-essential stores will remain closed until April 18. "We are in a very, very serious situation," Merkel said.
That being said, the rate of the euro dropped very significantly, and the last hope remains at 1.1835. If the bears manage to bring the quote even lower, EUR / USD will trade at 1.1790 and 1.1740. But if the bulls manage to return the quote to 1.1880, EUR / USD will hit 1.1940 and 1.2000.
Today, a number of important reports regarding the European economy will be published, and they will certainly affect volatility and market sentiment. Strong figures will most likely lead to an increase in EUR/USD, while weaker-than-expected numbers will cause a continued decline in the pair.
As for the GBP/USD pair, the market remains under the control of bears, so if the quote goes below 1.3710, the pound will collapse to 1.3650 and 1.3600. But if the bulls manage to return the price to 1.3760, GBP/USD will climb towards the 38th figure.
