Consumer inflation in the US eased to 1.4% in January, which became a surprising development. It was expected that rapid commodity inflation will push up consumer prices in the US, but it looks like the time has not come yet. Fed chairman Jeremy Powell, who spoke yesterday about the labor market, expectedly said that the Fed wants to see inflation at least at 2% before thinking about reducing monetary support. Thus, the head of the Fed confirmed that interest rates in the United States will remain at about zero for a long time (at least several years).

Powell also urged to be careful with labor market data. He said that the real unemployment rate is around 10%, well above the official 6.8%. It's all about the peculiarities of counting the unemployed. Due to the pandemic benefits, many of them are not looking for work, so they are not considered unemployed.

All in all, Powell's speech was like trying to tell investors that the Fed will help the US government borrow money in the debt market to finance a $1.9 trillion relief package. Thanks to this, risky assets felt more confident, and the dollar was under greater pressure. Technically, the dollar index has formed a triangle pattern, which makes it possible to break below with a retest of the support zone by 90 points:

The European economy will recover slower than anticipated after the coronavirus downturn, but 2022 will be stronger. This is the conclusion made by the European Commission in its latest report.

Agency analysts predict growth of the economy, consisting of 19 member countries at 3.8% in 2021 and the same in 2022, after falling by 6.8% in 2020. In November last year, analysts believed that growth in 2021 will be 4.2% and 3.0 % in 2022. Obviously, the new forecasts take into account the impact of repeated lockdowns that were introduced in winter. Large EU economies remain constrained by social curbs, which makes the growth of European stock assets rather restrained. In addition, this neutralizes the weak dollar in EURUSD and prevent the pair from confidently continuing the upward movement.

With lockdowns still prevailing in Europe for the most part, the economy is likely to show negative growth again in the first quarter. However, most likely this has already been taken into account in valuations of European assets and the European currency, so the data for the first quarter should not bring much disappointment to the market.

Activity will gradually pick up in the second quarter and will show the most vigorous growth rates in the third quarter, due to the fact that pent-up demand is expected cause a short-term positive shock in consumption. Due to this, it is expected that the main growth in EURUSD will occur in the third quarter of 2021.

France and Spain are expected to show the highest growth rates of 5.5% and 5.6%, so French and Spanish equities, should deservedly receive increased attention and favor from investors.

Inflation in the Eurozone is expected to be 1.4% in 2021 and 1.3% in 2022, so the ECB will have to maintain a stimulating bias in policy and will probably not change the parameters of QE for a long time, and even more so the interest rate on deposits.

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