Expert view on the Currency market

The European currency shows mixed dynamics of trading against the US dollar during the Asian session, consolidating near the local highs from November 30, updated the day before. The European Central Bank's decision on a gradual tightening of monetary policy provided moderate support to the single currency yesterday. The interest rate remained unchanged at zero, but the regulator will reduce the volume of purchases of bonds under the PEPP program at a slower pace early next year, which will allow it to completely curtail the program by early April 2022. As before, the ECB set a target inflation rate for the start of a rate hike at 2%, noting the existing risks and the ambiguous situation around the detection of the Omicron coronavirus strain. Investors today are focused on November statistics on consumer inflation in the euro area. The Consumer Price Index is expected to slow down from 0.8% to 0.5% on a monthly basis, but maintain the same growth rate at 4.9% on an annualized basis. The core CPI in November may slow down from 0.3% to 0.1%. Also during the day statistics from IFO on the level of business optimism for December is expected to be published in Germany.

The European currency is showing flat dynamics against the US dollar in the Asian session, consolidating near 1.1300. Market activity remains subdued as traders await the publication of the results of today's meeting of the European Central Bank (ECB) on interest rates. It is assumed that the European regulator will not change the current parameters of monetary policy, but the updated forecasts and comments from officials will be very important, especially in light of the fact that the US Federal Reserve has tightened its rhetoric. The day before the American regulator accelerated the pace of reduction of the quantitative easing (QE) program, planning to complete it in full by March 2022. Next year, the US Fed also expects three rate hikes by 0.25 basis points, but the nature of the growth of the rate curve will depend on the dynamics of the labor market. The macroeconomic statistics from the US published yesterday somewhat disappointed investors, ultimately not allowing the dollar to consolidate at new local highs. Retail Sales in November fell sharply from 1.8% to 0.3%, while market forecasts assumed a slowdown to only 0.8%.