EUR/USD: C. Lagarde’s tone and language will be scrutinized

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(News Bulletin 247) – The Euro was drifting around perfect parity against the Dollar on Thursday at midday, in an anxious market ahead of the verdict of the ECB, which is completing a new Board of Governors. Not that the actual decision on the rates is the subject of panting suspense – the option of a 75 bp increase in the key rates is almost certain -, but it is the overall attitude of the Institution , his possible inflections in his elements of language, his comments at a press conference which will be scrutinized, in particular in the light of the latest inflation figures, the IFO of the business climate in Germany and the PMI barometers of activity down.

“Beyond the probable and consensual decision to raise rates by 75 basis points, it is more the speech of Ms. Lagarde that will be scrutinized”, notes Emmanuel Auboyneau, Managing Partner of Amplegest. The European economy is slowing down noticeably and is likely to enter recession soon.”

“Should the ECB continue to act strongly on inflation, even if it means worsening an already worrying economic situation, or should it, like the Federal Reserve in the United States, start adopting a less offensive tone? Lagarde walks on eggshells and has to keep a difficult balance between growth and inflation. This is the whole point of this meeting which will set the tone for the coming weeks.”

See you at 2:15 p.m. for the monetary policy decisions themselves and at 2:45 p.m. for the press conference by Christine Lagarde and Luis de Guindos.

“The challenge of tomorrow’s meeting is less the level of rates (the markets are already expecting a sharp rise) than the content of the press release accompanying the rise and Christine Lagarde’s speech in the face of the economic slowdown”, abounds in this meaning Alexandre BARADEZ (IG France), for whom “the markets will monitor whether the language of the ECB will integrate these risks [de récession] as moderating factors to the upcoming rate hikes and the aggressive rhetoric that has been prevalent so far.”

Germany, the leading economy in the Euro Zone, confirmed that it would enter recession at the turn of the year.

On the macro side, the Conference Board’s consumer confidence index came out this month at 102.5, down sharply below expectations. Note this Wednesday a much larger than expected widening of the deficit, certainly structural, of the trade balance of goods in the United States: -92.2 billion dollars, for the month of September. To be followed across the Atlantic this Thursday, the very first estimates of Q3 GDP, durable goods orders and weekly registrations for unemployment benefits at 2:30 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0045 about.

KEY GRAPHIC ELEMENTS

The opposing forces momentarily rebalanced themselves in the immediate vicinity of perfect parity, with currency traders giving themselves a “meeting” on this threshold before two crucial monetary meetings which could upset the balance of power. Neutral opinion issued immediately.

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 keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 0.9665 USD and the resistance at 1.0175 USD.

CHART IN DAILY DATA

©2022 News Bulletin 247

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