19.04.202110:37 Forex Analysis & Reviews: Euro will plummet if EU authorities push through with their plan of scaling down support measures

Euro continued to trade sideways because of conflicting situations from Europe and the United States. On the one hand, the new Italian Prime Minister, Mario Draghi, refused to skimp on measures, continuing to spend money for Italy's economy. On the other hand, business confidence in the US grew slower than expected.

Hence, last Friday, the euro did not manage to break above 1.1990, disappointing bullish traders. They were aiming for a further upward move because such could set off a large jump towards 1.2050 and 1.2110. Meanwhile, going below 1.1945 will result in a decline to 1.1910 and 1.1880.

At the same time, late last week and over the weekend, a debate erupted among officials over the vaccination campaign in Europe. Some also wanted to reduce, if not completely curtail, support measures. The European Central Bank will meet this week to discuss these issues more thoroughly, although it is clear that the central bank believes that removing the programs earlier than expected will hit financial markets seriously.

Italy's new prime minister, Mario Draghi, is also dead set on his stance of implementing massive fiscal stimulus. In fact, in the first few months of his term, he already allotted € 70 billion to lift Italy's economy. And combined with stimulus measures taken by the previous government, the package totals over € 170 billion (for Italy alone). According to the latest government data, this widens the budget deficit to at least 11.8% of GDP.

Draghi believes that European economies will become stronger if fiscal and monetary measures work together. Unfortunately, such action will lead to the sharp increase of government debt.

To date, Italy's trade surplus fell to € 4.754 billion, which is clearly lower than its figure a month earlier. Exports have dropped 4.4% year-on-year, while imports dipped by 1.6%. On a monthly basis, exports were up 0.3%, while imports were 1.4% higher.

With regards to the whole Euro area, CPI is reported to have accelerated to 1.3% this March, from 0.9% in February. Core inflation, on the other hand, dropped to 0.9%.

Obviously, this means that increased energy prices pushed the indicators up, having recorded an annual growth of 4.3%. A more significant increase is expected after the EU succeeds in its vaccination program.

But the bloc's trade surplus went down to € 18.4 billion this February, from € 28.7 billion a month earlier. According to reports, this is caused by exports dipping by approximately 2.5% (month-on-month), while imports were up 3.4%. On a yearly basis, both exports and imports fell by 5.5%.

As for the United States, the University of Michigan reported that consumer sentiment for April rose to 86.5 points, lower than the expected 89.6 points. The index of current conditions, meanwhile, rose to 97.2 points. As for the index for consumer expectations, it remained at 79.7 points.

With regards to the real estate market, the US Department of Commerce said the number of residential buildings being commissioned rose 19.4% to 1.739 million a year, after falling by 11.3% last February. Apparently, there is a significant increase in the number of new homes for both single and multi-family. Building permits also jumped 2.7% to 1.766 million a year.