The Euro is heading for its 3rd straight day of gains as we enter the European trading session which started after the FOMC minutes released on Wednesday which seemed to confirm the timing for a reduction in the stimulus program from the US Federal Reserve.
As had been widely expected for several weeks, the Fed hinted that they would begin reducing their bond buying program which was introduced to counter the devastating effects that the Covid 19 virus has delt to the US economy. The surprising thing however was there was no mention of any interest rate hikes which surprised analysts and sent the Euro higher by almost 70 points against the greenback.
Disappointing data from America such as the producer price index which hit the market at 0.2% against analysts’ expectations for a number of 0.5% has also lent some support to the Euro.
In a speech yesterday, European Central bank president Christine Lagarde retreated that the current inflation rate in the Eurozone, which is unusually high will be temporary and as the effects of the coronavirus subside we should see a more stable figure.
"We continue to view this upswing (In inflation) as being largely driven by temporary factors," she told the IMF's International Monetary and Financial Committee.
"The impact of these factors should fade out of annual rates of price changes in the course of next year, dampening annual inflation. So far, there is no evidence of significant second-round effects through wages and inflation expectations in the euro area remain anchored, but we continue to monitor risks to the inflation outlook carefully," she added.
As we can see on the chart, the Eur/USD currency pair found strong support at the $1.1528 level and is now trying to break through the resistance mark of $1.1621 and this will more than likely be dictated today by the release of key economic data.
With basically no news from the Eurozone the market will await retail sales and the Michigan consumer sediment index from the US towards the end of the trading day to dictate he the Eur/USD currency pair will finish the week.