(News Bulletin 247) – Between the outcome of the Governing Council of the ECB and a new Monetary Policy Committee of the Fed next week, the opportunity will be good and clear for traders to refine the respective monetary trajectories, and to deduce from this the potential difference in “remuneration” between the two currencies.
On the Fed side, currency traders remain on the lookout for any signal that could invalidate or confirm a scenario of a slowdown in the rate of tightening of the monetary tap for the months to come. Investors are clinging to information from the Wall Street Journal according to which some members of the Federal Reserve would not be against the idea of ​​slowing the pace of its monetary tightening from December before stopping the hikes in key rates at the beginning of next year. Also according to this article, the institution would be heading for a rate hike of 0.75 percentage points at its next meeting in early November.
Thomas Giudici, joint head of bond management at Auris Gestion, wonders: “Is this a harbinger of the long-awaited “dovish pivot” of the Fed? The members of the FOMC seem, in any case, still divided , the more dovish campaigning for a pause to watch the fallout from tighter financial conditions. [hors alimentation et énergie] should continue to be vigorous in the coming months due to strong inertia on certain components (rents in particular), will the Fed take the gamble of releasing the pressure too soon after making a mistake in 2021?
On the ECB side, the scenario of an increase of 75 basis points is almost unanimous. “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.”
In terms of statistics, the IFO business climate index paused in its decline. A step aside, according to Nomura strategists “after significant declines during 2022.” For them, “as the German recession is felt, […] the current situation component will continue to decline, while the expectations component should bottom out.”
Across the Atlantic, the Conference Board consumer confidence index came out this month at 102.5, down sharply below expectations.
At midday on the foreign exchange market, the Euro was trading against $1.0025 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 maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 0.9500 USD and the resistance at 1.0000 USD.
CHART IN DAILY DATA
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