How the new US tax policy is related to the Fed’s monetary policy. The dollar is ready to continue its growth. Lagarde urged not to rush to change course



Yesterday’s speech by the President of the European Central Bank Christine Lagarde put pressure on the euro, although it was more about the EU banking system and profit forecasts. Lagarde said that despite the spread of the coronavirus and the resumption of quarantine, the European Central Bank’s expectations for economic growth in the eurozone remain very positive.

The head of the ECB noted that many of the uncertainties that previously darkened the prospects for economic recovery have now cleared up. We are talking about the elections in the US and the Brexit trade deal with the UK, as well as the start of vaccination in the EU. At the same time, Lagarde warned that monetary policy and the support that it provides to the entire system will continue to continue at the same levels. The ECB forecasts the growth of the European economy in 2021 by 3.9%. It is based on expectations of faster economic growth after the completion of quarantine measures. According to Lagarde, the start of this year will be more positive than previously thought.

Let me remind you that according to the latest reports, many banks, on the contrary, have lowered their forecasts for the growth of the euro zone. Research reports from JPMorgan Chase & Co. and UBS Group AG downgraded their forecasts for 2021, making many investors nervous. Strengthening quarantine measures in various regions of the eurozone, as well as a new strain of coronavirus, the outbreaks of which continue to be recorded not only in the UK, all this creates a darker prospect for the economic recovery of the eurozone in early 2021. JPMorgan expects the economy to contract 1% in the first quarter of 2020 against 2% growth in the previous forecast. UBS expects first-quarter drop to be 0.4% from its previous forecast of 2.4% growth. Goldman Sachs Group Inc even stated that they forecast a slight reduction with great uncertainty and risks.

The European Central Bank will hold a meeting next week, which will determine the monetary policy. A report will be released today from the last meeting in 2020, at which the governing council extended its emergency bond purchase program until March 2022. In today’s minutes, traders will closely monitor how the ECB plans to use the promised € 1.85 trillion in aid, and whether recommendations will be made to use them in full.

Christine Lagarde also spoke on this yesterday, saying that if the new aid package, which was agreed upon earlier, is too large, then it is not necessary to use it in full. At the same time, the head of the ECB announced that if there is not enough aid, the bond purchase program could be increased, which led to a decline in the European currency against the US dollar, where the situation could develop in the opposite direction.

Lagarde also recalled that the ECB will closely monitor the growth of the euro against the dollar, which will put pressure on inflation by reducing import costs.

If you have already started the topic of inflation, then it is worth mentioning yesterday’s forecast of the German central bank. In it, economists are preparing for a surge in price pressures that could reach the target of the European Central Bank. The consumer price index is forecast to rise to 3.1% over the next 12 months. But this is the average forecast of the economists surveyed. The Bundesbank predicts that inflation in Germany will rise to 1.8% this year from -0.7% at the end of 2020. The main driver of growth will be the increase in gasoline prices after the introduction of the emission tax, as well as the expiration of the temporary VAT reduction, which the government resorted to last summer.

Now with regard to yesterday’s figures for the American economy. US consumer prices rose in December 2020 in line with economists’ estimates, according to the report. The report said that the CPI rose 0.4% in December, after rising 0.2% in November. The Ministry of Labor said that the main increase in the consumer price index was due to a jump in gasoline prices by 8.4%, which was about 60% of the total growth. Food prices increased by 0.4% in December.

As for the underlying index, which does not take into account volatile categories, it rose 0.1% in December after rising 0.2% in November. The annual growth rate of consumer prices in December did not change compared to the previous month and amounted to 1.6 percent.

The slowdown in core inflation suggests that the Federal Reserve is unlikely to rush into the much talked about changes in monetary policy recently. Fed Chairman Jerome Powell will speak today to shed light on the future of politics as part of the new plan proposed by the Joe Biden administration. Certainly, additional fiscal stimulus measures within the framework of the new fiscal policy will certainly accelerate inflation, which may lead to a tightening of monetary policy, but this is unlikely to happen as quickly as expected. At the same time, if a new package of measures to help the American economy is adopted, the need to buy out such a volume of bonds by the FRS may noticeably decrease, which will lead to a faster revision of policy in order to prevent overheating of the economy.

As for the technical picture of the pair EURUSD, then, most likely, the pressure on the European currency will continue. If the bulls fail to regain the 1.2180 range today, and the market remains below this level, we can count on the return of risky assets to the lows of the month in the 1.2130 area and their renewal, which will open up a direct opportunity for the euro to fall to the 1.2080 and 1.2010 areas. It will be possible to speak of a reversal of the downtrend only if a bad inflation report in the US leads to a strong bullish impulse and a breakout of the 1.2225 high.


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Yesterday’s speech by the President of the European Central Bank Christine Lagarde put pressure on the euro, although it was more about the EU banking system and profit forecasts. Lagarde said that despite the spread of the coronavirus and the resumption of quarantine, the European Central Bank’s expectations for economic growth in the eurozone remain very positive.

The head of the ECB noted that many of the uncertainties that previously darkened the prospects for economic recovery have now cleared up. We are talking about the elections in the US and the Brexit trade deal with the UK, as well as the start of vaccination in the EU. At the same time, Lagarde warned that monetary policy and the support that it provides to the entire system will continue to continue at the same levels. The ECB forecasts the growth of the European economy in 2021 by 3.9%. It is based on expectations of faster economic growth after the completion of quarantine measures. According to Lagarde, the start of this year will be more positive than previously thought.

Let me remind you that according to the latest reports, many banks, on the contrary, have lowered their forecasts for the growth of the euro zone. Research reports from JPMorgan Chase & Co. and UBS Group AG downgraded their forecasts for 2021, making many investors nervous. Strengthening quarantine measures in various regions of the eurozone, as well as a new strain of coronavirus, the outbreaks of which continue to be recorded not only in the UK, all this creates a darker prospect for the economic recovery of the eurozone in early 2021. JPMorgan expects the economy to contract 1% in the first quarter of 2020 against 2% growth in the previous forecast. UBS expects first-quarter drop to be 0.4% from its previous forecast of 2.4% growth. Goldman Sachs Group Inc even stated that they forecast a slight reduction with great uncertainty and risks.

The European Central Bank will hold a meeting next week, which will determine the monetary policy. A report will be released today from the last meeting in 2020, at which the governing council extended its emergency bond purchase program until March 2022. In today’s minutes, traders will closely monitor how the ECB plans to use the promised € 1.85 trillion in aid, and whether recommendations will be made to use them in full.

Christine Lagarde also spoke on this yesterday, saying that if the new aid package, which was agreed upon earlier, is too large, then it is not necessary to use it in full. At the same time, the head of the ECB announced that if there is not enough aid, the bond purchase program could be increased, which led to a decline in the European currency against the US dollar, where the situation could develop in the opposite direction.

Lagarde also recalled that the ECB will closely monitor the growth of the euro against the dollar, which will put pressure on inflation by reducing import costs.

If you have already started the topic of inflation, then it is worth mentioning yesterday’s forecast of the German central bank. In it, economists are preparing for a surge in price pressures that could reach the target of the European Central Bank. The consumer price index is forecast to rise to 3.1% over the next 12 months. But this is the average forecast of the economists surveyed. The Bundesbank predicts that inflation in Germany will rise to 1.8% this year from -0.7% at the end of 2020. The main driver of growth will be the increase in gasoline prices after the introduction of the emission tax, as well as the expiration of the temporary VAT reduction, which the government resorted to last summer.

Now with regard to yesterday’s figures for the American economy. US consumer prices rose in December 2020 in line with economists’ estimates, according to the report. The report said that the CPI rose 0.4% in December, after rising 0.2% in November. The Ministry of Labor said that the main increase in the consumer price index was due to a jump in gasoline prices by 8.4%, which was about 60% of the total growth. Food prices increased by 0.4% in December.

As for the underlying index, which does not take into account volatile categories, it rose 0.1% in December after rising 0.2% in November. The annual growth rate of consumer prices in December did not change compared to the previous month and amounted to 1.6 percent.

The slowdown in core inflation suggests that the Federal Reserve is unlikely to rush into the much talked about changes in monetary policy recently. Fed Chairman Jerome Powell will speak today to shed light on the future of politics as part of the new plan proposed by the Joe Biden administration. Certainly, additional fiscal stimulus measures within the framework of the new fiscal policy will certainly accelerate inflation, which may lead to a tightening of monetary policy, but this is unlikely to happen as quickly as expected. At the same time, if a new package of measures to help the American economy is adopted, the need to buy out such a volume of bonds by the FRS may noticeably decrease, which will lead to a faster revision of policy in order to prevent overheating of the economy.

As for the technical picture of the pair EURUSD, then, most likely, the pressure on the European currency will continue. If the bulls fail to regain the 1.2180 range today, and the market remains below this level, we can count on the return of risky assets to the lows of the month in the 1.2130 area and their renewal, which will open up a direct opportunity for the euro to fall to the 1.2080 and 1.2010 areas. It will be possible to speak of a reversal of the downtrend only if a bad inflation report in the US leads to a strong bullish impulse and a breakout of the 1.2225 high.


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Yesterday’s speech by the President of the European Central Bank Christine Lagarde put pressure on the euro, although it was more about the EU banking system and profit forecasts. Lagarde said that despite the spread of the coronavirus and the resumption of quarantine, the European Central Bank’s expectations for economic growth in the eurozone remain very positive.

The head of the ECB noted that many of the uncertainties that previously darkened the prospects for economic recovery have now cleared up. We are talking about the elections in the US and the Brexit trade deal with the UK, as well as the start of vaccination in the EU. At the same time, Lagarde warned that monetary policy and the support that it provides to the entire system will continue to continue at the same levels. The ECB forecasts the growth of the European economy in 2021 by 3.9%. It is based on expectations of faster economic growth after the completion of quarantine measures. According to Lagarde, the start of this year will be more positive than previously thought.

Let me remind you that according to the latest reports, many banks, on the contrary, have lowered their forecasts for the growth of the euro zone. Research reports from JPMorgan Chase & Co. and UBS Group AG downgraded their forecasts for 2021, making many investors nervous. Strengthening quarantine measures in various regions of the eurozone, as well as a new strain of coronavirus, the outbreaks of which continue to be recorded not only in the UK, all this creates a darker prospect for the economic recovery of the eurozone in early 2021. JPMorgan expects the economy to contract 1% in the first quarter of 2020 against 2% growth in the previous forecast. UBS expects first-quarter drop to be 0.4% from its previous forecast of 2.4% growth. Goldman Sachs Group Inc even stated that they forecast a slight reduction with great uncertainty and risks.

The European Central Bank will hold a meeting next week, which will determine the monetary policy. A report will be released today from the last meeting in 2020, at which the governing council extended its emergency bond purchase program until March 2022. In today’s minutes, traders will closely monitor how the ECB plans to use the promised € 1.85 trillion in aid, and whether recommendations will be made to use them in full.

Christine Lagarde also spoke on this yesterday, saying that if the new aid package, which was agreed upon earlier, is too large, then it is not necessary to use it in full. At the same time, the head of the ECB announced that if there is not enough aid, the bond purchase program could be increased, which led to a decline in the European currency against the US dollar, where the situation could develop in the opposite direction.

Lagarde also recalled that the ECB will closely monitor the growth of the euro against the dollar, which will put pressure on inflation by reducing import costs.

If you have already started the topic of inflation, then it is worth mentioning yesterday’s forecast of the German central bank. In it, economists are preparing for a surge in price pressures that could reach the target of the European Central Bank. The consumer price index is forecast to rise to 3.1% over the next 12 months. But this is the average forecast of the economists surveyed. The Bundesbank predicts that inflation in Germany will rise to 1.8% this year from -0.7% at the end of 2020. The main driver of growth will be the increase in gasoline prices after the introduction of the emission tax, as well as the expiration of the temporary VAT reduction, which the government resorted to last summer.

Now with regard to yesterday’s figures for the American economy. US consumer prices rose in December 2020 in line with economists’ estimates, according to the report. The report said that the CPI rose 0.4% in December, after rising 0.2% in November. The Ministry of Labor said that the main increase in the consumer price index was due to a jump in gasoline prices by 8.4%, which was about 60% of the total growth. Food prices increased by 0.4% in December.

As for the underlying index, which does not take into account volatile categories, it rose 0.1% in December after rising 0.2% in November. The annual growth rate of consumer prices in December did not change compared to the previous month and amounted to 1.6 percent.

The slowdown in core inflation suggests that the Federal Reserve is unlikely to rush into the much talked about changes in monetary policy recently. Fed Chairman Jerome Powell will speak today to shed light on the future of politics as part of the new plan proposed by the Joe Biden administration. Certainly, additional fiscal stimulus measures within the framework of the new fiscal policy will certainly accelerate inflation, which may lead to a tightening of monetary policy, but this is unlikely to happen as quickly as expected. At the same time, if a new package of measures to help the American economy is adopted, the need to buy out such a volume of bonds by the FRS may noticeably decrease, which will lead to a faster revision of policy in order to prevent overheating of the economy.

As for the technical picture of the pair EURUSD, then, most likely, the pressure on the European currency will continue. If the bulls fail to regain the 1.2180 range today, and the market remains below this level, we can count on the return of risky assets to the lows of the month in the 1.2130 area and their renewal, which will open up a direct opportunity for the euro to fall to the 1.2080 and 1.2010 areas. It will be possible to speak of a reversal of the downtrend only if a bad inflation report in the US leads to a strong bullish impulse and a breakout of the 1.2225 high.





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