FX.co ★ EURUSD: The euro is aiming for annual highs. There are no people willing to buy the dollar

The euro gained a lot of weight against the US dollar after today's fundamental data, which indicated an increase in economic confidence in the euro area. The speech of representatives of the European Central Bank also strengthened the position of risky assets against the US dollar.

Economic confidence in the euro area improved in February this year, as consumers and businesses became more optimistic about their future thanks to the rapid rollout of an EU vaccination company. Thus, the sentiment index from the European Commission rose to 93.4 points, which is the highest level in a year. Almost all indicators rose at once. Industry, services, and consumer sentiment indicators improved, although confidence in the retail and financial services sectors declined slightly. Many companies and households expect that after stagnating in the first quarter of this year, the economy will begin to recover much faster in the spring thanks to the lifting of the long-term lockdown and the lifting of quarantine measures. Many also expect to receive part of the funds from the EU recovery fund, although its distribution can be expected no earlier than the second half of the year. And while the industrial sector is not experiencing any difficulties with growth, problems remain in the service sector, which is struggling to cope with the coronavirus pandemic and quarantine restrictions that have closed most shops, bars, and restaurants. The report also indicated that manufacturers raised their expectations, while retailers expressed concern. Among advanced economies, optimism grew in Germany and Italy. The drop was recorded in Spain and the Netherlands.

As for Germany, consumer confidence will improve in March. The latest report, which was prepared by the market research group GfK, indicates that the leading index of consumer sentiment in March rose to -12.9 points against -15.5 in the previous month. Economists had expected a reading of -14.3 points. The increase was because consumers are slowly recovering from the shock caused by the result of strict isolation imposed in mid-November last year. The recent decline in the number of people infected with the coronavirus also gives hope that the restrictive measures will be eased in the near future. As for consumer confidence in France, the indicator was slightly worse than economists' forecasts. A report from the Insee Bureau of Statistics said that the consumer confidence indicator fell to 91 points in February, while economists had expected it to remain at 92 points.

As noted above, the speech of the chief economist of the European Central Bank had a positive impact on the European currency. Philip Lane said that the ECB stands ready to use all its emergency program of bond purchases to counter the growth of profitability. He reiterated that the regulator is closely monitoring the development of long-term nominal bond yields and is ready to act at any time following market conditions. In the immediate aftermath, German 10-year bond yields briefly declined before resuming gains. His counterpart, Isabel Schnabel, also said today that the ECB is ready to make sure that there is no unjustified tightening of monetary policy.

The main problem for the European currency, which resumed its growth against the US dollar, is the gap in the growth rates of the US and European economies. According to UniCredit SpA, President Joe Biden's $ 1.9 trillion economic stimulus bill will increase his administration's spending in 2021 by more than three times the planned spending of eurozone countries. This will lead to the growth of the US economy by 1.8%, while in the eurozone GDP may shrink by 0.1%. The growth of the economy, together with the growth of consumer spending, will also pull inflation, which will force the Federal Reserve to resort to raising interest rates. This will strengthen the US dollar against the euro and several other world currencies. But for now, these are just expectations for the next few years. The Fed and the ECB are actively saying that there can be no question of any tightening of monetary policy, and even more so of curtailing asset purchase programs. Against this background, the exchange rate of the European currency continues to grow, as investors are more inclined to risky assets.

As for other fundamental statistics on the euro area, the European Central Bank published a report today, according to which the M3 monetary aggregate, as expected, grew. Growth was 12.5% in January, after a 12.4% increase in December last year. At the same time, household lending jumped immediately by 9.6%.

As for the technical picture of the EURUSD pair, much will now depend on whether buyers of risky assets will be able to close the day above the level of 1.2220 or not. If so, we can safely count on the continued strengthening of the European currency already in the area of the highs of 1.2260 and 1.2305. If not, then most likely, the pressure on the euro will return, which will lead to a downward correction to the support area of 1.2180.