The euro declined during a speech by the president of the European Central Bank, who acknowledged the weakening of the economic cycle. In his opinion, the incoming data confirms the slowdown of the economic impulse, however, some of the special factors that impair economic growth weaken. Geopolitical risks and threats associated with protectionism remain the main problem, which worsens economic sentiment, and the eurozone still needs a significant degree of monetary stimulus.
Draghi noted that the slowdown in the economic momentum will continue this year, and overall inflation is likely to decline in the coming months. As for the details of the new LTRO operations, they will be announced at a future meeting. The main pressure on the euro was formed by the statement that the ECB is ready to adjust all the instruments if necessary, which is a direct signal to maintain or lower rates if necessary to negative levels.
Good data on consumer price increases in the United States also supported the US dollar. The increase was due to volatile oil prices, which allowed to hide the moderate basic inflationary pressure.
According to the US Department of Commerce, the consumer price index in March 2019 rose by 0.4% compared with the previous month, while the basic consumer price index, which does not take into account the volatile categories, grew by only 0.1% compared with the previous month. Economists had expected that in March of this year, the overall index rose by 0.3%, while the base index would add 0.2%.
As noted above, the main growth was due to the increase in energy prices, which rose in March by 3.5% compared with the previous month. Compared with the same period of the previous year, consumer prices rose by 1.9%.
In the afternoon, the minutes of the April meeting of the Federal Reserve System was released, which indicated a slowdown in economic growth in the 1st quarter. However, the committee believes that it is temporary and growth will resume in the 2nd quarter of 2019. Most of the Fed officials also agree that the rates will not change this year, although there is still a small chance for one increase. Much will depend on the incoming economic data.
Fed officials also revised down their forecasts for US GDP growth this year and were surprised by the fact that inflation remains weak, despite the strong labor market and duties.
As for the technical picture of the EURUSD pair, it remained unchanged. Buyers of risky assets are still trying to find the strength and overcome resistance in the area of 1.1290, which will lead to a strong increase in the euro in the area of highs of 1.1325 and 1.1360. With the development of the bearish scenario, the lower limit of the side channel 1.1230 will support, and its breakthrough will only increase the pressure on the euro, which will lead to a test of the monthly minimum around 1.1180.
The material has been provided by InstaForex Company - www.instaforex.com