Market Analysis – EURUSD
The Euro/US Dollar exchange rate continues to appreciate in value during this morning Asian session as it had on Friday. The asset in general has been increasing in value since the end of March, increasing by 3.45% and by almost 0.70% on Friday alone. The latest momentum was mainly developed by the positive PMI Reports across the Eurozone released on Friday.
Looking at the EU’s Manufacturing PMI, instead of falling, it rose from 62.5 to 63.3 points. Service PMI increased from 49.6 to 50.3 points and returned to the growth zone for the first time since August of last year. Corresponding data for Germany were slightly lower due to the widespread of the pandemic. Manufacturing PMI decreased from 66.6 to 66.4 points instead of 65.8 expected and Service PMI fell from 51.5 to 50.1 points. Both indicators remained in the growth zone. Overall, the European economy is showing signs of growth despite quarantine measures.
Thursday and Friday during a 2-day conference the head of the European Central Bank, Christine Lagarde, admitted a general decline in business activity in the first quarter of this year, but promised its growth in the second half. However, the growth is only supported by fiscal and monetary stimulus advised by the President. She has advised the economy is only currently running due to funding by the central bank to regional central banks and regional government within the group. M.s Lagarde stood firm confirming no alterations to interests nor economic stimulus in the foreseeable future.
Now, looking across the Atlantic to our quote currency, the administration of US President Joe Biden is considering a serious tax increase to raise $1Trillion to implement a program to support American families, subsidize childcare, preschool education, and so on. It is assumed that the capital gains tax will increase from 20.0% to 39.6% and will apply to those citizens who earn $1M or more per year. Other options are being considered, such as raising inheritance taxes or reducing tax deductions for wealthy Americans. The details of the new project will be announced next week but it is already causing a negative reaction from investors. Nevertheless, there is no complete confidence that the tax increase will be approved by Congress since the project causes discontent not only among the Republicans, but also among some of the Democratic congressmen.
Today, investors are focused on economic statistics from the US on the dynamics of durable goods orders. Forecasts are very optimistic in this regard, given the pace of recovery in the American economy and the rapid growth of consumer purchasing activity. In addition, investors are preparing for the US Fed’s meeting on the interest rate, which will be held on April 28. The regulator is expected to clarify its plans to tighten monetary policy, as the pace of recovery exceeds initial forecasts.
It is important for traders not only to evaluate the developments within the economy and politics, but also the price movement itself. Looking at the Euro on Friday, the currency strengthened against its main competitors including the JPY, GBP, and USD. The movement of the Euro this morning is mixed depending on the currency pair; though currently against the US Dollar, the Euro is increasing in value. Both last Friday and today, the US Dollar is weakening against its main competitors including CAD, JPY, and GBP. Both currency indexes (EURX and USDX) are currently declining this morning.