EURUSD is up 9%, while the trade-weighted euro index is up 4.7% in 2020. Last week, Governing Council member and Bank of France governor François Villeroy de Galhau warned that the ECB is “closely monitoring the negative impact of inflation on inflation. euro “.
The yen and dollar remain the worst to date as markets are generally risk-averse. Investors are awaiting a Senate hearing on US Treasury nominee Janet Yellen for more information on her stance on fiscal stimulus and the dollar exchange rate. However, buyers switched from commodity currencies to the euro and Swiss franc.
The Australian dollar is still strong, but the Canadian dollar is starting to lag. While the ECB is likely to leave its monetary policy unchanged this week, the market should focus on several issues: members’ views on the recent strengthening of the euro, discussions on QE cuts, and the economic impact of renewed lockdowns.
Following the December recalibration, the ECB will keep the Pandemic Emergency Procurement Program (PEPP) at € 1,850 billion and the Asset Purchase Program (APP), its traditional QE program, at € 20 billion per month. The deposit rate will also remain unchanged at the level of -0.5%.
German Chancellor Angela Merkel agreed with state leaders to extend national isolation until February 14. Europe’s largest economy is grappling with a significant wave of coronavirus cases and deaths.
Italy, the third-largest economy in the eurozone, is in a political crisis. The government survived a vote of no confidence in the lower house, and political scientists suggest that Prime Minister Giuseppe Conte has received sufficient support in the Senate.
The EUR/USD pair continued its steady intraday upward movement and renewed daily highs in the 1.2135-40 region during the European average.
The pair built on the previous session’s rebound from seven-week lows near mid-1.2000 and gained strong momentum in the first half of Tuesday’s trading. This momentum was supported by new US dollar selling and received an additional boost from the better-than-expected ZEW Economic Sentiment Index in Germany.
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