Euro Supported, Bulls Back on Track?
After starting the week softly, the Euro is back, reversing losses and posting higher following strong data. Specifically, the German CPI's growth was enough to send theEuro above $1.21 versus the greenback. Rising inflation in the European powerhouse could thrust the Euro higher considering the last few months' struggles. Before solid gains yesterday, Germany was in a state of deflation, declining in the past four months.
Rising inflation can be interpreted as positive. However, this is not forgetting Angela Merkel's threat that she may lock Germany for a little longer as long as the COVID-19 infection count continues to rise. However, confidence in the bloc is that the coronavirus vaccine is being rolled out, which may help change the tide in the medium term, sending inflation higher. Additionally, experts are positive about the economic conditions in the bloc. Industrial production is at pre-COVID-19 levels suggesting the Euro may be in demand as export increases. In Germany, the ZEW Economic Sentiment in January increased more than expected, rising to a four-month high, suggesting just how upbeat manufacturers. Most expressed optimism on improving economic conditions and industrial exports.
Impact on the Euro:
Neutral to Bullish. Despite confidence in Europe, there have been no tier-one releases from the United States. At the same time, prices are peaking, with a possibility of extending if US Treasury yields move higher.
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