Perhaps unsurprisingly, most of the major currencies in the Eurozone are trading in the green today as investors begin to recover from the latest market sell-off.
The euro strengthened above the one-month moving average, as traders anticipated a rebound in the euro zone’s purchasing managers’ index (PMI) on Tuesday. The euro’s upside could be helped by data on private sector activity, which is published on Tuesday, and by an interest rate decision by the European Central Bank, which is expected to keep its key rate unchanged on Wednesday.
The Euro remained in focus this week, as European Central Bank policymakers in Frankfurt and the European Court of Justice both agreed to continue to buy bonds on the secondary market. In doing so, the ECB, which has been buying large quantities of bonds, is looking to boost the economy and create more inflation. The court ruled against the ECB, saying that its bond buying program was illegal. The ECB then issued a statement saying it would continue buying bonds.. Read more about eur/usd forecast today and let us know what you think.
- Infrastructure deal gives boost to sentiment
- PCE data in focus
- Markets continue to grow
The currency market felt the impact of the approval of the US infrastructure deal yesterday. This news weakened the U.S. dollar, which is recovering, and boosted other major currencies, particularly the euro. The single currency has returned to the 1.20 level as positive news is expected soon on trade relations between Germany and the US. The focus will be on the Fed’s preferred inflation indicator, with PCE data expected to be released. Wall Street also continues to rise as the law promising more than $500 billion in infrastructure spending creates positive sentiment.
Both sides have reached an agreement on US infrastructure
President Biden announced yesterday that we have a deal on American infrastructure. Under the agreement, about $579 billion will be spent in a number of areas. These include road, rail, energy and broadband networks, all of which are long overdue. Given the bipartisan nature of the bill, it should get the support it needs to move quickly through the Senate.
For those trading currencies, this has created positive market sentiment, leading to a drop in demand for the safe-haven USD and a timely boost for other major currencies, particularly the EUR. The German economy minister also welcomed progress in trade relations between the US and the EU, which could lead to the removal of tariffs on steel and aluminium.
A key inflation indicator attracts attention
A report on personal consumption expenditure will be published later today. This indicator is used by the Federal Reserve System as a key measure of inflation. Analysts expect the report to show a 3.4% year-on-year increase through May.
Currency traders expect the release of this data to move the markets based on the results. Many fear that inflationary pressures are creeping into the current market, and the Fed has also taken a more cautious tone recently. Fed Chairman Jerome Powell remains open to the possibility that inflation is a bigger factor than expected and higher than we previously thought.
Wall Street continues to make very good progress
Wall Street was buzzing with excitement yesterday as markets continued to rally on news of a bipartisan agreement on the infrastructure bill. All the major indexes rose, with the Down Jones continuing its good week by adding another 300 points. The technology-intensive NASDAQ index also set a new record. After falling last week, all major markets are up more than 2% this week.
The main news that will drive the market today is the PCE data, with a downward gap likely to lead to further uptrend, but any uptrend will be a concern.The Euro is getting crushed by the pound, and that is an important thing to keep track of. While most of the world continues to laugh at the possibility that Germany could ever do anything right, the Euro has continued to strengthen against the dollar despite the political malaise and the perception that Europe is in a state of perpetual crisis.. Read more about gbpusd buy or sell and let us know what you think.
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