Today, the market focuses on important statistical data from the USA and, of course, the ECB's final decision on monetary policy. What awaits the euro? Let's find out.
So, the main European regulators, the Bank of England and the ECB, keep key interest rates at high levels despite inflation falling to the target level of 2%. In continental Europe, consumer inflation is at 2.5%, formally giving the ECB the right not to lower rates, while the British regulator is practically ignoring this. For the last two months, the consumer price index in the United Kingdom has been at 2%.
In the previous article, I examined the probable reason for such actions using the Bank of England as an example. Today, I want to look at the situation surrounding the ECB and the unclear position of its president, Christine Lagarde, regarding the prospects for easing monetary policy.
For all central banks belonging to the western wing of the global economy, the current monetary model aims to maintain consumer inflation, or simply inflation in annual terms, at the level of 2% or around this. I have previously written about the reason for this 2% parameter, which is not economically justified but rather arbitrarily set, as they say, out of thin air at the end of the last century.
Europe is experiencing a severe economic crisis, the reasons for which we will not discuss today, which is largely sustained by high interest rates that hinder the region's economic growth. In this situation, the regulator is simply obliged to find ways out of it, especially since the consumer price index (CPI) is approaching the target mark of 2%. The ECB should consider easing monetary policy to promote economic growth and exit the crisis, but this is not happening. Following the ECB meeting, all monetary policy parameters are expected to remain unchanged, with the key interest rate at 4.25%.
So why is the ECB delaying this decision?
As with the Bank of England, which I mentioned in yesterday's article, I will return to the conspiracy theories that are perceived in the political science community as reality. This is a deliberate weakening of Europe by America, solving its economic and political problems at the expense of its main satellite. In Europe, including Britain, comprador, pro-American forces are in power, carrying out Washington's will. The Ukrainian crisis vividly and accurately confirms this. The political and economic desires of the US are fully realized by these pro-American forces, even at the expense of their national interests. One could argue that these are globalist forces, but it does not matter because the orders come from Washington.
I also want to draw your attention to one fact. Since the beginning of this century, the Federal Reserve has aimed to weaken the dollar against major currencies and, of course, the yuan in its efforts to achieve successful competition for goods and services from America in foreign markets. A "weak" dollar guarantees successful economic competition, in addition to aircraft carriers.
Now, with a colossal external debt that is unlikely ever to be repaid, America seeks to compensate for this problem by weakening Europe, and for this, a "weak" dollar is necessary. However, this is extremely difficult to achieve in the current situation because the massive crisis has affected everyone and everything.
Now, let's return to the ECB's prospects. The bank will try not to lower rates for as long as possible, even when the Federal Reserve does so. And only then, when Washington allows it, will it be done. Lagarde will find various reasons not to do this; consider the Bank of England.
What can the EUR/USD pair expect following the ECB meeting?
The decision to keep rates unchanged and Lagarde's unclear position at the press conference regarding the prospects for easing monetary policy will lead to a rise in the pair. Overall, looking at the market picture, we can talk about continued growth in demand for US stocks, gold as a safe-haven asset, and a decline in the dollar against major currencies following the publication of labor market data, the number of jobless claims, and the ECB's final result, unless, of course, it suddenly decides to cut interest rates by 0.25%, which in itself is unlikely in the current situation.
Forecast of the Day:
EUR/USD
The pair is consolidating above 1.0920 in anticipation of the ECB's final decision on monetary policy. A decision to leave all monetary policy parameters unchanged could raise the pair to 1.1000.
XAU/USD
The spot price of gold is rising after yesterday's partial profit-taking. An increase above the mark of 2481.60 could lead to further growth to 2500.00.