12.05.202111:27 Forex Analysis & Reviews: US inflation data to set the market today. ECB will maintain a soft monetary policy.

Data on US inflation will set the market today. If the figure is much higher than expected, then demand for dollar will rise. But if the indicator is weaker than projected, dollar will decline against euro and pound.

In any case, Goldman Sachs believes that any growth in the indicator will be short-lived, and that it will not go beyond 2.0%, contrary to what the Fed is aiming for.

This is because even though latest reports are pointing to unprecedented rise in inflationary pressures, the sustainability is questionable. In addition to that, the Federal Reserve already said it will continue to buy $ 120 billion bonds every month, until the US reaches maximum employment and beyond 2.0% inflation.

As for other macro statistics, bad data on CPI will also lower demand for the dollar, which will accordingly set off a strong rally in EUR / USD.

But if such a scenario really happens, the European Central Bank will face problems on bond purchases and currency rates. It will also raise the question of whether support measures should be curtailed already, so as to prevent an overheating of the economy.

Of course, weak liquidity in the coming months will allow the ECB to bring down bond purchases, which is a technical necessity because otherwise, the central bank risks flooding the market.

Accordingly, this may lead to early rate hikes and easing of support measures, plausibly by the third quarter. But other ECB members are opting for a more cautious approach, announcing a possible expansion of the € 1.85 trillion bond purchase program.

In any case, both sides have agreed to maintain favorable financing conditions, and this can manifest in the coming months, while there is a lull in the market.

This means that during the next meeting, the European Central Bank is unlikely to even talk about plans of revising the stimulus policy, especially since the euro has all the chances of continuing growth.

But in the meantime, a lot depends on 1.2115, as going below it will result in a larger decline towards 1.2060. But if the quote goes back to 1.2150, bullish traders will have the chance to reach 1.2180.

With regards to other macro statistics, US job vacancies soared to a record high this March, indicating a sharp rise in the labor market. The number of vacancies increased to 8.12 million, well above the expected 7.5 million.

Average home prices also increased, by as much as 16.2%. Apparently, the market is now noticing that the period of low mortgages will end soon, so they are acting quite haphazardly.

On a different note, another variant in COVID-19 was discovered in India, thereby inflicting fears in both UK and EU. Analysts warn that a sharp increase in infections will undermine the government's plan to resume work, but it is necessary as delaying the lockdown may lead to disastrous consequences like we observed before.

UNICEF also said the UK could donate around 20% of its vaccines to other countries in dire need of the medication. It will not reduce the supply for the country as according to the UN, there is enough vaccine for every adult by the end of July. This decision was made right before the G7 summit next month. France also said it could donate 5% of its vaccines.