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EUR/USD – The euro soars after EBC meeting minutes release; CPI data in focus – Analysis for January 12th 2018

The dollar weakened significantly after the publication of weak data from the producer price index, which showed the first fall since 2016. The euro received support after the publication of the report of the meeting of the European Central Bank, which will probably decrease the level of fiscal stimulation. Support is set at 1.195, resistance at 1.25.

Commentary:

The European currency strengthened significantly on Thursday after the publication of the minutes from the December meeting of the European Central Bank, which showed that the bank may start a change in the direction of monetary policy. It seems that the ECB is preparing to reduce the level of fiscal stimulation. The euro strengthened after publication by 0.73% to the $1.2032 level, which is the largest increase in one day against the dollar for about 2 months.

According to the minutes, the economy of the euro area is enjoying the largest growth in the last decade, so the bank should gradually change the direction of monetary policy to avoid sudden changes in the future. The ECB is to slowly move away from bond purchases and focus more on interest rates.

The dollar index, reflecting its strength against the six major currencies fell to 91.814. Data from the producer price index released on Thursday showed a 0.1% drop, although an increase of 0.2% was forecasted. This is the first drop in almost a year and a half, decreasing hopes that inflation will finally accelerate this year and raises concerns about the pace of further interest rate hikes by the Fed.

Today’s news:

  • 14:30 USA – Consumer price index
  • 14:30 USA – Advance retail sales
  • 14:30 USA – Average earnings

Technical analysis:

eurusd1221

Pic.1. EUR/USD chart.

The dollar found itself under pressure once again due to inflation concerns and hawkish EBC meeting minutes release. Today the markets will be focused on the US data, as we’re waiting for the release of consumer price index data. A disappointing reading may further weaken the greenback and push the pair towards the 1.25.

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