Today was the final ECB meeting for this year - and at the same time the first one that is chaired by Christine Lagarde. Contrary to the fears of some analysts, she did not bring down the European currency with her dovish intentions. Lagarde was clearly trying to maintain a certain balance in her rhetoric (following the manner of Mario Draghi), and she almost succeeded. The EUR/USD pair did not slump, but did not jump - by and large, following the results of the December meeting, the pair remained in the same positions as before the meeting of the ECB members. The pair retreated to the bottom of the 11th figure after the fact - for other reasons, which we will discuss below.
Returning to the direct results of the ECB meeting, it should be noted that they turned out to be quite neutral - neither the bulls nor the EUR/USD bears were able to become beneficiaries of this event. Lagarde noted both the pros and cons of the current situation, while making it clear that the European regulator is ready to implement one of two scenarios: either the central bank softens its monetary policy in 2020 or maintains a wait-and-see attitude. The option of raising the rate is not considered now, however, as is the option of expanding incentives. In general, such rhetoric was taken into account in quotes, so it did not make much impression on traders. But the updated economic forecasts included positive surprises for the euro, due to which the EUR/USD pair slightly grew after Lagarde's press conference ended.
Speaking in the language of numbers, the situation is as follows. The ECB has revised its forecast for economic growth in the eurozone for the current year upward (up to 1.2% from the previous value of 1.1%), but at the same time downward revised its forecast for the next year (up to 1.1% from the previous mark 1 , 2%). For the first time, forecasted GDP indicators for 2022 were published - according to ECB members, the economy will grow to 1.4% (a similar value for 2021). As for inflation, the situation here is mirror-like: if the forecast for this year was maintained at the previous level, then the regulator announced more optimistic estimates for the next year (1.1% instead of 1.0%). The inflation forecast in 2021 was revised to 1.4% (the previous estimate was 1.5%), and for 2022 it remained at 1.6%.
As you can see, the published forecasts do not allow bears or bulls to declare their dominance. Nevertheless, traders focused on the growth of the inflation forecast for the next year - this fact supported the euro. The subsequent rhetoric of Lagarde complemented the optimistic picture, after which the pair again touched the middle of the 11th figure. First, she stated that bearish risks for inflation have become "less significant", although they still prevail. Secondly, Lagarde positively evaluated the latest macroeconomic releases (apparently, we are talking about the CPI and ZEW) - in her opinion, now we can say that there are "the first signs of a slowdown in the economy." Thirdly, the head of the ECB again appealed (albeit very indirectly) to the leaders of the countries "with budgetary opportunities" with an appeal to take "decisive action". Although Lagarde did not specify her requirements today, the hint was more than transparent. The fact is that over the past two months she has repeatedly called on Germany and the Netherlands, with their "chronic budget surpluses", to increase investment and government spending. Today she once again conveyed a concealed greeting to these countries.
In contrast to optimistic estimates, Christine Lagarde again recalled that the risks for the eurozone economy remain downward, so "if necessary", the central bank is ready to use the available levers of influence on monetary policy. However, this phrase even under Mario Draghi has become familiar and to some extent a "duty".
Thus, despite the caution of the head of the ECB, the euro received some support from the European regulator. Following the results of the December meeting, the EUR/USD pair not only maintained its position, but also received an occasion for short-term price jumps of an impulsive nature to the region of the middle of the 11th figure.
Why did the situation change dramatically during the US session on Thursday? The pair sharply turned and headed towards the 10th figure, and already after the fact of the ECB meeting. According to most currency strategists, Trump played a role here, who, using Twitter, again forced traders to turn their attention to themselves. He published a very short but capacious post, in which he stated that "China is close to a deal." At the same time, the US president added that the American side also wants to sign a trade agreement. On the one hand, the market is used to similar tweets - for the most part they are emotional, so to speak, "without practical continuation". But along with Trump's message, encouraging information came from the Wall Street Journal. Journalists of this influential publication reported that the White House finally offered Beijing the long-awaited compromise solution: the United States reduces duties on Chinese imports by 50% (worth $360 billion) and refuse to introduce duties, which should take effect on December 15 (worth $160 billion dollars).
The dollar jumped across the market amid such news, reflecting increased demand. The EUR/USD pair was no exception: with a high degree of probability it will return to the framework of the 10th figure today. If the above rumors are indeed confirmed, then the downward trend may continue, at least to the first support level of 1.1030 (the lower boundary of the Kumo cloud on the daily chart). Having broken this level, the bears will open their way to the lower line of the Bollinger Bands indicator on the same timeframe, which corresponds to the level of 1.0970.
The material has been provided by InstaForex Company - www.instaforex.com