This morning, we said that the Democrats and Republicans are close to an agreement that will allow us to allocate about $2 trillion to support the economy. This package will be aimed at protecting the American economy from the worst consequences of the coronavirus pandemic. At the beginning of the European session, a White House representative said that they had reached an agreement with the Democrats, and it is expected that today Senator Mitch McConnell and the leader of the Democratic faction, Chuck Schumer, will speak at the meeting with a proposal to approve this bill. The representative of the Democratic party said that the negotiations were successful enough to get guarantees of higher unemployment benefits.
Given that the situation in the markets is gradually stabilizing, volatility is also returning to normal. From the fundamental data that came out today for Germany, where the indicator of sentiment in the German business community in March was lower than the preliminary estimate, we can conclude that the fear of coronavirus only worsened business expectations for the future, which without assistance from the authorities seems very gloomy.
According to a report by the Ifo Institute, the calculated index of business sentiment in Germany in March 2020 was 86.1 points against a preliminary estimate of 87.7 points. The survey was conducted between March 2 and 18. The index for February was revised down to 96.0 points. Economists had predicted that the index would reach 87.4 points in March. By the way, the current value of the index is the lowest since the beginning of the financial crisis in 2008-2009.
The report also indicated that the current conditions index fell to 93.0 points in March, while the expectations index fell to 79.7 points.
Many experts already predict a 10% decline in German GDP in the 2nd quarter compared to the previous quarter. All this is directly related to the spread of the coronavirus pandemic, which will have a serious impact on economic activity in the future.
As for the technical picture of the EURUSD pair, it remained unchanged compared to the morning review. At the moment, to continue the upward correction, buyers of risky assets need to try very hard not to allow the lower border of the ascending channel to break in the area of 1.0780 since its breakdown will lead to a reversal of the trend and the return of large sellers of risky assets to the market. Also, the task of the bulls will be to update the maximum of yesterday in the area of 1.0930, since without it, the demand for a trading instrument may slow down sharply. Bears will try to break through the lower border of the ascending channel, and will also attempt to consolidate under the support of 1.0725, which will lead to another major sale of the euro and a test of the lows of the year.
The British pound managed to temporarily strengthen its position against the US dollar after the report on inflation in the UK was better than economists’ forecasts. According to data, the UK consumer price index (CPI) in February 2020 increased by 0.4% m/m, and by 1.7% per annum, which is quite a good indicator in the face of a pandemic that the whole world is trying to cope with. The core consumer price index, which does not take into account volatile categories, showed growth of 0.6% in February and 1.7% per annum. The UK consumer price index for February was forecast to be 0.3% and 1.7%, respectively. However, it is worth noting that the data for February does not cover all the problems that the UK economy is currently facing. Inflation is likely to slow down sharply in the near future due to a sharp drop in oil prices, as well as restrictions related to gas and electricity tariffs.
As for the producer price index, it fell to 0.3% in February and rose only 0.4% year-on-year, while the producer price index fell by 1.2% and 0.5%, respectively.
As for the technical picture of the GBPUSD pair, all attempts of the bulls to continue the upward correction ended with another sale of the British pound. If buyers miss the support of 1.1800, it is likely that the pressure on the trading instrument will only increase, which will lead to updating levels such as 1.1630 and 1.1470.