EUR / USD. Greenback anti-records and "green color" IFO

The US dollar index continues to slide down. During the Asian session on Wednesday, it renewed its two-year low, at 89.57. The last time the index was at such low values ​​was in January 2018. This dynamic was reflected in the major dollar pairs. For example, the euro-dollar pair has renewed a multi-month high, approaching the borders of the 23rd figure. To one degree or another, the greenback is under pressure in other pairs of the "major" group.
The American currency came under additional pressure after yesterday's macroeconomic releases and comments from FRS officials. There is no trace of the former confidence of the dollar bulls: all signals of a fundamental nature indicate that the Fed will maintain the current parameters of monetary policy in the foreseeable future, even despite the abrupt growth of inflation indicators. And if last week traders “grabbed at straws” (pointing to the hawkish hints of the latest Fed protocol), at the moment the last hopes of dollar bulls have finally collapsed. After the publication of the high-profile report on the growth of inflation in the United States, almost all representatives of the American regulator spoke. And all of them unanimously assured traders that the Central Bank would not adjust its policy, responding to only one single release.

EUR / USD. Greenback anti-records and "green color" IFO

In particular, yesterday the vice-president of the Fed, Richard Clarida, once again voiced this thesis of a pigeon character. He said that "someday", of course, the time will come to discuss the winding down of QE, but now it is too early to talk about it. At the same time, Clarida stressed that when assessing the prospects for monetary policy, it is necessary to take into account not only the dynamics of the consumer price index, but also the growth of wages and productivity, together with employment and the share of the active population. Thus, the vice-president of the FRS reminded investors that the latest Nonpharmies were a significant disappointment - all the components of the release were in the "red zone". A member of the Board of Governors of the Federal Reserve Randall Quarles, who has not yet commented on the latest inflationary release, also added fuel to the fire yesterday. He supported his colleagues, saying that inflationary pressures are likely to "be temporary", so there is no reason to revise the parameters of monetary policy.
Macroeconomic reports, which were published yesterday in the US, also put pressure on the greenback. For example, the indicator of American consumer confidence unexpectedly came out in the "red zone", although experts predicted a slowdown in the indicator. But the real figures turned out to be lower than the forecasted values: the indicator came out at around 117.2 points while the forecast of growth to 119 points. At the same time, the April result was revised downward. Other releases disappointed. In particular, the Fed-Richmond manufacturing index also fell short of the forecasted values, and the volume of home sales in the US primary market fell by almost 6% in April.
But the European currency received support from the IFO reports yesterday. Thus, the German indicator of economic expectations for the first time since February 2018 exceeded the 100-point mark, against the backdrop of a continuing improvement in the epidemiological situation and mass vaccination of the population. The business environment indicator also entered the green zone, reaching 92 points (the best result since April 2019). It should be recalled here that the latest ZEW reports also came out in the green zone. In particular, the German business sentiment index jumped to 84 points - the best result in the last 20 years.
Prior to this, the euro was also supported by PMI indices. French, Italian, and European-wide indicators entered the "green zone", reflecting the recovery processes in both the manufacturing sector and the service sector. Only the German index of business activity in the manufacturing sector pumped up - it fell short of the forecast level, showing a slight decline. Nevertheless, the indicator remained well above the 50-point value (64 points), which indicates an improvement in the situation in this area of ​​the economy. At the same time, the PMI index in the service sector in Germany exceeded the forecast level (53 points against the forecast of growth to 51 points). These results reflect the optimism of European entrepreneurs regarding the prospects for the recovery of the regional economy.

Additional support for the euro is provided by the fact that some members of the ECB allow early winding down of QE. And although the head of the European Central Bank Christine Lagarde opposed hasty decisions in this direction, a certain uncorrelation with the Fed regarding the prospects for tightening monetary policy parameters allows the eur / usd bulls to conquer new price heights.
FX24

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