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Media reports say an international team of scientists arrived in Wuhan this morning to start WHO's study on the coronavirus.
With this, it will only be a matter of time before the world finds answers to the questions regarding the virus. In particular, we will finally know the true origin of COVID-19, as there are a lot of theories on this subject.
In another note, it seems that many are beginning to seriously consider the recent statements of the European Central Bank regarding the likely decline in deposit rates. Just last Wednesday, a member of the Board, Klaas Knot, said the regulator is closely monitoring the rate of the euro, so it may decrease interest rates if necessary to achieve target inflation. Other ECB members have also said the same.
Current economic conditions are also not that good. In fact, the latest reports say the EU economy contracted in the fourth quarter, after recovering in the third. Specifically, Q4 GDP was down by 0.7%, after rising by 12.4% in the previous quarter. On an annualized basis, the economy fell by 5.1%, while for the whole of 2020, it collapsed by 6.8%.
Separately, the largest GDP contraction was observed in Austria, where the indicator fell by 4.3%. In Italy, GDP decreased by 2%, while in France, it dropped by 1.3%. Only Germany recorded growth to 0.1%. These declines are most probably brought by low consumer demand and decrease in exports caused by the restrictions.
But as long as countries are in lockdown, the economy will not be able to recover to pre-crisis levels. Activity will continue to be halted, or at least be disrupted, amid tight restrictions. Unfortunately, such a scenario could lead to a double recession.
In fact, the International Monetary Fund (IMF) already revised its GDP forecast for the EU economy, from 5.2% to 4.2% this 2021.
Anyhow, today, a number of economic reports will be published, and they may put pressure on the European currency. But given the recent market behavior, in which the euro declined amid good data instead of the other way around, it is possible that bad indicators will not cause strong pressure on EUR / USD.
Large players may also begin playing against speculators, which will lead to an increase in the pair.
Therefore, it is important for euro bulls to bring the quote to 1.2055, as a break above which will certainly push EUR / USD higher, towards 1.2090 and 1.2130. But if the euro returns to 1.2015, the pair could quickly fall to 1.1970, and then collapse deeper to 1.1925.
With regards to other reports, Insee said consumer prices in France rose this January, thereby increasing inflation to 0.6% year-on-year. Growth is mainly due to volatile product categories. In particular, on the price increase of tobacco products and services.
On a monthly basis, consumer prices rose 0.2%.
As for the US, business activity in New York slowed significantly. According to the Institute for Supply Management (ISM), the index of current business conditions fell to 51.2 points, from 61.3 points a month earlier. The slowdown was observed in all sub-indices.
GBP/USD
House prices in UK rose 6.4% year-on-year this January, following a 7.3% increase last December. But on a monthly basis, it fell by 0.3%, after climbing by 0.9% in the previous month.
With regards to GBP/USD, a break above 1.3755 will certainly lead to a jump towards the 38th figure. In particular, towards 1.3880 and 1.3960. But if the quote drops below the 36th figure, GBP/USD will decline to 1.3530, and then to 1.3460.
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