EUR/USD: the market project … on the projections of the Fed

(BFM Stock Exchange) – This article, with free access, is produced by the research team in BFM Stock Exchange analysis and market strategy. To not miss any opportunity, consult all of the analyzes and discover our portfolios by accessing our privilege space.

The euro continued its lateral consolidation against the dollar, supported by the vote by the Bundestag, the lower chamber of the German parliament, of the reform of the so -called “debt brake”. This reform constitutes a prerequisite for the proper implementation of the mega investment plan of several hundred billions of euros in defense and infrastructure.

The ball is now in the Bundesrat camp, the upper room, which will have to rule on this same level on Friday. Deutsche Bank expects this vote to find a positive outcome. However, the great unknown remains the future decision of the German Constitutional Court, points out the German bank, even if there again it judges that the institution should approve the reform.

In perspective therefore, massive investment expenditure in infrastructure, for companies from the entire euro area, and in defense.

“The European Defense sector is part of a new era of investment and strategic autonomy. Faced with the increase in geopolitical risks and uncertainty about the support of the United States, European nations take proactive measures to build a more robust and self-sufficient military ecosystem. Despite financing difficulties, the increase in budgets, technological investments and commitments to NATO renders this Aneeka Gupta, Director, Macroeconomic Research, Wisdomtree.

For its part the dollar remains solid, but gradually loses its superb as the indices of an inflection point on the American economy are multiplying. Last indicator to date, the U-Mich of consumer-moral barometer continued its decline in March, a new crazy in expectations. It is in this context that a new Fed monetary policy committee ends this Wednesday. And this in a lack of penalizing visibility, due in particular to the procrastination of Donald Trump, and his aggressiveness, on the issue of customs duties.

These prices, “if they are applied, will initially have inflationary consequences which do not plead for new monetary easing” advances Emmanuel Auboyneau, associate managing at Amplegest. “But the uncertainty they generate could also weigh on economic growth which could, conversely, encourage the federal reserve to be more flexible. Everything will depend on the reality of the figures.”

“The message delivered by Jerome Powell will be interesting to decipher and will give the trend for the future. It should probably remain cautious and reserve all the future room for maneuver. No decision decision should be announced at this meeting.”

Meet at 7:00 p.m. for the announcement on the rates proper and updated economic projections, and at 7:30 p.m. for the press conference.

But if a status quo is indeed acquired on the rates proper, the issue is elsewhere. Three very important elements will be scrutinized. The new economic projections of the Fed, especially in terms of growth and inflation, the elements of language used at a press conference, and … the famous dowry studs, this point histogram published each quarter. The mechanics are simple: the 12 voting members, under the cover of anonymity, register their feeling as to the level of the Fed Funds for the next deadlines.

“We will particularly monitor the new growth projections for this year: during the projections of December, the Fed had enhanced its anticipation for 2025 to 2.1% against 2.0% in September. The risk of a downward revision of this figure therefore seems important, knowing that the Fed of Atlanta anticipates for the moment a contraction of American GDP in the first quarter. The Fed lowers its growth forecasts for this year, while keeping its inflation forecasts unchanged, “warns Alexandre Baradez (IG France).

In the statistical chapter, let us recall the strong increase in the ZEW index in March. “This improvement in the economic climate is probably explained by positive signals concerning the future German fiscal policy, such as the financial agreement of several billion euros for the federal budget. The prospects have notably improved for manufacturers of metals and steel, as well as for the mechanical construction sector. Finally, the sixth consecutive decrease in interest rates by the ECB is reflected in favorable funding conditions and companies, “said the president of the Zew Achim Wambach.

As for the various consumer prices indices in the euro zone published at the end of the morning, no surprise to report, prices increased by 2.6% at an annual rate in final data for February, excluding volatile elements (food, alcohol, tobacco, energy).

At midday on the foreign exchange market, the euro was treated against $ 1,0910 approximately.

Key graphics elements

The crossing in significant volatility of $ 1,0608 changes the situation on the configuration of the currency pair, which has just validated a resumption of support on a long mobile average, at 50 days (in orange), which begins a resource figure. The scenario of a fast melting towards the perfect parity (€ 1 = $ 1) is invalidated.

Medium term

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on Euro dollar parity (Eurusd).

We will keep this neutral opinion as long as the EURO Dollar parity prices (EURUSD) are positioned between the support at 1,0758 USD and the resistance to USD 1,1012.

Daily data graphics