EURUSD remains active. Overview for 11.06.2021

EURUSD continues consolidating as there aren’t enough drivers for more active movements. 

The major currency pair is slowly rising on Friday but the sideways channel keeps prevailing. The current quote for the instrument is 1.2188.

During its June meeting, the European Central Bank kept its monetary policy completely intact. The benchmark interest rate remained unchanged and the tone of the ECB Governor Christine Lagarde was rather neutral. She said that inflation in the region remained quite moderate but the regulator’s new forecasts indicated that the core inflation was slowly increasing. According to the ECB, the core inflation must be below its targets throughout the entire forecast period.  

In the last several months, inflation in the Euro Area boosted due to several factors, such as the price surge for energies. In the second half of 2021, inflation is expected to continue growing but may later drop after temporary factors disappear. 

The ECB believes that friendly financing terms are very important during the period of recovery from the coronavirus pandemic. Such terms are necessary for supporting economic activity and maintaining mid-term price stability. 

According to the regulator, early tightening of financial terms will lead to the same in morу global lending terms and threaten both inflation prospects and the entire economic recovery, that’s why interest rates will remain at their current levels or lower until the ECB sees that inflation gets close to 2%. 

The USA published inflation reports, which gave pause for thought. For example, the CPI showed 0.6% m/m in May after being 0.8% m/m in the previous month. On YoY, the indicator showed 5%, which is the highest reading since August 2008. The indicator might have increased so much due to wage indexationб as well as the growth of unstable index components, such as food, energies, etc. 

The inflation issue might well be the reason that will force the US Fed to change its rhetoric on interest rates and monetary policy during the next meeting.