The absence of those willing to buy the euro and the British pound at the current highs, as well as the fundamental recharge, which is so lacking in risky assets, all this led to a downward correction of the EURUSD and GBPUSD pairs. In the meantime, traders are taking profits and thinking about how central banks will behave in the face of rising inflation and low interest rates, a global agreement that could change the tax landscape for the largest corporations is approaching its first stage, as the G7 countries are clearly determined on significant changes in this direction.

The meeting of finance ministers is scheduled for this Friday, and although it will be held virtually, next week there will be a personal meeting, at which, quite possibly, quite a lot of common ground will be found regarding the formation of views on tax increases. “We are in the final stages of reaching an agreement,” German Finance Minister Olaf Scholz said Wednesday at a virtual press conference with his French counterpart Bruno Le Mer. European governments are increasingly insisting on the observance of the previous agreement at the last G-7 meeting.

This week, the administration of President Joe Biden enacted a minimum tax minimum of 15%, but for American companies that operate overseas and pay taxes in the United States, the tax rate is 21%. European countries agree with this approach, but insist that large tech companies pay more of their taxes in the countries where they operate. It is also known that the White House administration has spoken out against attempts to target taxation on specific industries.

Returning to the topic of interest rates and stimulus programs. Central bankers around the world are pondering the future of their massive bond buying programs in a post-pandemic world. Everyone understands perfectly well that large inflated balance sheets lead to high expectations, however, allowing the economy to overheat at this moment will be a huge problem and will negate all the efforts that have been expended. From the latest statistics, the G7 countries have amassed a record $ 7 trillion in debt. The funds were used to fight the pandemic and keep the economy in good shape. Most of the debt is held by central banks, which have aggressively pursued bond purchases. While asset purchases continue, officials from the US Federal Reserve and the European Central Bank are already wondering how they can safely reduce bond purchases. At the same time, they need to continue to ensure uninterrupted economic recovery.

Leading experts point out that the main problem is that markets are used to relying on central banks, which use their power to smooth over the problems with the economic recovery. Economists have long sounded the alarm about the long-term impact of quantitative easing. No one doubts that the Fed's balance sheet will be gigantic for a long time to come. However, in the coming years, it will be largely determined by the decisions of the open market committee regarding asset purchases and reinvestment policies. Still, the Fed expects the balance to rise to $ 9 trillion by 2023, equivalent to 39% of gross domestic product. Under various scenarios, the Fed's assets may remain at this level until 2030.

This suggests that this approach of the American central bank will put pressure on the dollar for a very long time and increasingly attract investors to the side of rice assets. This is fraught with the growth of the EURUSD pair in the long term.

As for yesterday's fundamental statistics, data on consumer sentiment in France did not support the euro much, although it improved in May this year. Insee's report said consumer confidence rose to 97 points in May from 95 points in April. The estimate was in line with economists' expectations.

As for the technical picture of the EURUSD pair, the trading instrument returned to the area of ​​large support at 1.2180, on which the further direction of the pair will depend. Its breakdown will strengthen the sellers' positions, which will push the euro to a new minimum of 1.2125. If buyers manage to rectify the situation and hold above 1.2180, then we can count on an upward correction already in the area of ​​the middle of the new sideways channel 1.2220. A further target will be its upper border at 1.2265.

NZD

Monetary Policy Committee of the Reserve Bank of New Zealand yesterday quite expectedly decided to keep its official interest rate unchanged at a record low level of 0.25%. This was the 10th consecutive meeting without any changes after the RBNZ reduced the a 75 basis point gain to the current March 2020 level. The committee also kept the Asset Purchase Program (LSAP) at up to NZ $ 100 billion. The operation of the loan financing program has not changed either. As I noted above, the outlook for the global economy has continued to improve as fiscal and monetary stimulus is at the core of its recovery.

The NZBZ said in a statement that New Zealand's export commodity prices benefited from rising global demand, but differences in economic activity both within and between countries remain significant. The resilience of the New Zealand economic recovery continues to depend on containing COVID-19. As for the short-term economic outlook, it is quite expected that the incoming data will differ significantly from forecasts, and quite possibly for the better.

As for the technical picture of the NZDUSD pair, a lot depends on the breakdown of the 0.7310 level. If the bulls manage to go beyond this resistance, most likely we will see another update of the annual highs in the 0.7420 area and an increase beyond them to the level of 0.7560, where it will be possible to observe the active actions of the bears. If buyers once again fail to cope with the resistance at 0.7310, then most likely the pressure on the pair will return and we will find ourselves at the mercy of a downward correction to the area of ​​large support at 0.7155.