Market Analysis – EURUSD
During this morning’s Asian session, and the opening of the European session, we can see interesting movement on the EURUSD and, in general, some major currency pairs. The asset is currently increasing in value as it did the day before as well as reaching a 4-day high, trading at 1.17845. As today is Good Friday, there are few announcements due other than the employment figures in the US. European Markets are currently closed as they will be on Monday; US Markets are only closed today.
Published yesterday, data on Initial Jobless Claims in the USA disappointed investors. The indicator increased from 658K to 719K, above the expectations of experts. Nonetheless, they expect the downtrend in applications to resume soon as widespread vaccinations and $ 1.9 trillion in financial aid to the economy will support the labor market. Though it should be noted that today’s employment figures, which are due to be released, are of greater importance. We can use last month’s employment figures as an example regarding the importance and influence over the exchange rate. Last month we saw the biggest gains for the US Dollar after an extremely positive NFP Friday and the release of financial stimulus.
Yesterday, US President Joe Biden unveiled an infrastructure support plan. As expected, it will cost $2 trillion and last for 8 years. In particular, 621 billion is planned to be spent on modernizing roads, bridges and other transport infrastructure, 300 billion on modernizing power grids, another 300 billion on re-equipping affordable housing and schools.
The main negative for the US Dollar is the possible hike in taxes for the US taxpayers. According to the White House, further economic stimulus will be funded by raising the corporate tax rate to 28% from 21% and increasing the global minimum tax on U.S. corporations to 21% from 13%. In other words, completely undoing the changes from the previous president, it should be noted the attempt is likely going to encounter a lot of resistance from the Republicans.
Today, the US currency is weakening to the Euro, Yen and showing no major trend against the Pound. The Euro is strengthening against its main competitors including the Pound, the Yen, and the US Dollar.
The Euro is strengthening amid the release of positive March data on the Services PMI. The indicator for Germany rose from 60.7 to 66.6 points, meeting the market expectations. The index for the Eurozone increased from 57.9 to 62.5 points, exceeding the forecasts. This data shows that the European manufacturing sector continues to recover, providing the most significant support to the economy.
However, a number of other economic factors remain negative. The difficult pandemic situation is forcing the governments of the EU countries to tighten quarantine restrictions. Yesterday, French President Emmanuel Macron announced a third national isolation for at least a month, and schools in the country will be closed for three weeks. Berlin authorities intend to ban gatherings at night. Note that the national German lockdown, established earlier, had a negative impact on retail sales in the country. According to the latest February data, sales increased by 1.2% MoM instead of the expected 2.0%, and decreased by 9.0% YoY (against the forecast of 6.3%).