January 12, 2022
EUR/USD: The European currency is strengthening against the U.S. dollar. In the absence of significant economic releases, the attention of European investors is focused on the comments of representatives of the European Central Bank on the high inflationary pressure on the European economy. Let us recall that in December, the consumer price index in the euro area rose by a record 5.0%. Yesterday, ECB president Christine Lagarde said she understood citizens’ concerns over high prices and confirmed that they could trust the ECB to solve this problem. According to her, the bank is in favor of price stability, which is crucial to fix inflation expectations and confidence in the currency. Overall, European officials have yet to elaborate on new ways to combat inflationary pressures.
GBP/USD: The British currency is strengthening against the US dollar. December retail sales data from the British Retail Consortium (BRC) were released yesterday. Year-on-year sales rose 0.6%, better than market expectations (0.3%) but worse than November’s increase of 1.8%. Overall, BRC experts are skeptical. They believe that retail sales will face significant pressure this year as consumer spending will be constrained by rising inflation, increased energy bills and a coming tax hike in April. Note that the British government is trying to mitigate inflationary pressures on the economy. The Times newspaper reported that the UK Treasury Department is considering cutting the “green levy” imposed on electricity consumption in order to slow down the increase in prices on the energy market.
BRENT: Oil prices are making an attempt to grow. Prices are rising due to growing investor optimism. Market participants believe that oil demand growth can be maintained, as governments of the leading consuming states refuse from overly strict quarantine measures to curb coronavirus pandemic caused by “omicron” strain. In addition, prices are supported by the slow build-up of oil production by OPEC+ countries, which have not yet chosen the allotted quotas, and interruptions in the supply of “black gold” from Libya. Yesterday, investors also waited for the API oil inventories weekly report. The index declined by 1 mln barrels. The continuation of the downtrend supports oil quotes.