(News Bulletin 247) – The development of the protest rebound of the Euro against the Dollar, initiated after reaching perfect parity, is conditioned, as much on the decisions as on the tone employees, of the outcome of the Board of Governors that day. The trajectory of the “remuneration” differential between the two spot currencies depends on it.
“For the first time in nine years, the ECB has the courage to raise all key interest rates by 25 basis points,” notes Ulrike Kastens, Europe economist for DWS, who believes that “the bank will include in its announcement the normalization of monetary policy, i.e. further interest rate measures later this year. This tightening could be all the more pronounced as the announced program to combat the so-called fragmentation The existence of fragmentation, i.e. an “unwarranted widening of yield spreads”, is the subject of much debate. However, the ECB considers that a such an instrument is necessary to avoid a crisis situation like in 2011 and 2012.”
But a “last minute surprise”, namely a 50 basis point hike, remains possible for Frederik Ducrozet (Pictet WM) in particular because “the pressure could be part of the ongoing negotiations on the anti -fragmentation” and because the Governing Council may have received early evidence of a sharp rise in inflation expectations from the ECB’s Survey of Professional Forecasters (SPF).”
The new ongoing Italian political crisis – the Draghi government has effectively ceased to exist, even current affairs are managed – is also a brake on the extension of the rebound of the single currency, as are the latest geopolitical developments: Russia – through his head of diplomacy Sergei Lavrov – affirmed that his military objectives in Ukraine would no longer be confined solely to the east of the country, but could extend to “other territories”.
To follow as a priority on the statistical agenda this Thursday, the decision on European monetary policy at 2:15 p.m. and the press conference of the Institution at 2:45 p.m. On the American side, to follow the weekly registrations for unemployment benefits and the Philly Fed manufacturing index at 2:30 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0190 about.
KEY GRAPHIC ELEMENTS
The rebound in the single currency no longer finds energy early on, and waiting for the ECB’s decisions does not argue for new purchases. We are immediately adopting a neutral stance pending the triggering of alerts.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).
We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0000 USD and the resistance at 1.0274 USD.
CHART IN DAILY DATA
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