EUR/USD: Expectations of a firm tone from the ECB

(News Bulletin 247) – The Euro continued to resist against the Dollar, with the support of a promise of firmness from European monetary policy, ahead of the meeting of the Governing Council of the ECB in February . “Christine Lagarde will once again have to convince people that this movement is far from over. Inflexible in her mandate to fight inflation, a 50 bp increase is now guaranteed for this February meeting. All attention will be focused on on the announcements for the future: what pace in March? what terminal level for the deposit rate and on what horizon?” asks Julien Russo, portfolio manager, Swiss Life Asset Managers France.

In a market note aptly titled “ECB shows who’s boss of the market,” Nomura strategists argue that a 50 basis point hike is pretty much a given. While the latest European statistical publications, in particular the PMI and the German IFO, have brought their share of relief. “The ECB will likely use this positive outlook on activity as justification to continue to tighten policy aggressively in the near term, and to raise concerns about the resilience of growth which could lead to even more persistent core inflation “, continue the strategists of the Japanese bank.

The ECB will complete its Board of Governors on February 2, the day after the outcome of the Fed’s first FOMC of the year.

Yesterday in the statistical chapter, forex traders took note of a battery of US macroeconomic indicators beyond expectations, on growth (advanced GDP data), durable goods orders, trade balance, employment (weekly registrations for unemployment benefits).

To be followed at 2:30 p.m. the PCE prices, the Fed’s favorite measure in its assessment of inflation.

At midday on the foreign exchange market, the Euro was trading against $1.0870 around.

KEY GRAPHIC ELEMENTS

In the absence of validation of a configuration in ascending method, a continuation of neutral oscillations, in thin range near the moving average to 20 days (in dark blue) is expected. The very structure of the consolidation in progress testifies all the same to the advantage taken by the Euro at the start of 2023. Neutral opinion proposed 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 1.0645 USD and the resistance at 1.1190 USD.

CHART IN DAILY DATA

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