The Return of Central Banks The information presented in this publication is provided for informational purposes only and does not constitute investment advice, a sale offer, or a solicitation to buy, and should not be used as a basis or considered an incentive to engage in any investment. The macro point The Return of Central BanksMacro OverviewCentral banks were in action last week. During its March meeting, the US Federal Reserve (Fed) confirmed a cautious approach: it will only act when its inflation and full employment goals are met. In other words, no interest rate changes are expected before 2023. Furthermore, the asset purchase program is set to continue in the medium term, with 80 billion dollars in US Treasury bond purchases per month. The Fed clearly indicated that the temporary rise in inflation above 2%, which is expected, will not lead to any change in monetary policy (core inflation, meaning excluding energy and food products, has been revised up to 2.2% this year). This is certainly the most important takeaway from J. Powell's press conference. By maintaining a very accommodative stance over time, the Fed confirms in the process that it will do everything to support the Biden administration’s stimulus measures, particularly the infrastructure investment plan expected to be unveiled around mid-2021. Close cooperation between the US Treasury and the central bank will be a long-term affair, which is rather a positive signal regarding the trajectory of the economic recovery. The Bank of England meeting drew less interest from currency traders. The conclusions were, overall, similar to those of the February meeting. The central bank expects a strong economic recovery from the second quarter, thanks to the successful vaccination campaign. It has not altered its inflation forecasts, despite the recent rise in inflation expectations. Under these circumstances, the key rate remains at a historic low of 0.1%, and the asset purchase program continues as is. The total envelope to buy UK sovereign debt is set at 895 billion GBP. At the current pace of asset purchases, this envelope is not expected to be exhausted until the end of 2021. In fact, we expect monetary policy across the Channel to be on autopilot for the next nine months. Finally, in the absence of good news on the vaccination front in the EU, let's turn to the European Central Bank (ECB). The latter published the details of its latest bank refinancing operation (technically called TLTRO, for Targeted Long Term Refinancing Operation). Nearly 425 banks participated in the operation for a total amount of 330 billion euros. Why is this good news? By refinancing at low cost from the ECB, banks are better positioned to lend to households and businesses, thus supporting the activity recovery that should materialize by this summer at the latest in the euro area. Technical point We are still in a market environment rather favorable to the U.S. dollar. This state of affairs should continue for several more months. The growth differential between the U.S. and the rest of the world (linked to the vaccination process and support measures) will lead to an increase in capital inflows into the U.S., which is a supportive factor for the dollar against other currencies. In this context, it is likely that the downward movement of the EUR/USD will accelerate towards 1.18-1.17 in the medium term. Among the notable events of recent days, it is worth mentioning that the euro's decline continues against the pound sterling (with a drop of nearly 6% in three months). Last week, the pair reached a low of 0.8540. Our next target is 0.8422, which also serves as support. The supports and resistances shown below respectively indicate the low and high points within which the rates should evolve during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.17721.18621.21001.2237EUR/GBP0.84220.85000.86290.8672EUR/CHF1.09081.09971.11431.1177EUR/CAD1.45721.47101.50371.5162EUR/JPY126.59128.21131.46133.08For personalized advice on trends and currency hedges, contact our trading room: Announcements to follow This week will be busy both in terms of economic indicators and central bank speeches. Below, we have simply indicated the most notable events, namely the publication of the German manufacturing PMI for March (which should remain well-oriented in expansion territory) and the IFO business climate index (also at a high level). Despite uncertainties regarding the vaccination campaign on the European continent, the economic recovery is gradually taking shape. Below you will find the publications and events that should have a major impact on currency rate developments.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?24/0301:50BoJ January meeting minutes releaseThe focus will mainly be on the central bank's strategic review.09:30Manufacturing PMI (March)Economists' consensus points to a significant decline, to 56.5 from 60.7 previously.13:30Durable goods orders (February)Expected change to 0.9% from 1.3% the previous month.25/0313:30Last estimation of GDP for Q4 2020Confirmation expected at 4.1%.26/0310:00IFO business climate index (March)Maintain at a high level, at 90.5 according to consensus.Did you enjoy this content? Share it!