(News Bulletin 247) – The Euro is regaining momentum against the Dollar, in very high volatility, in the wake of the European Central Bank’s press conference yesterday, following a meeting of the Board of Governors.
Christine Lagarde, with all the necessary semantic precautions, further prepared the ground for a monetary shift on the part of the ECB, a turn certainly much less tight than the one that the Fed will try to negotiate. Under pressure after the publication, on Wednesday, of an unprecedented surge in inflation in the euro zone (+5.1% over one year in December, + 2.3% corrected for the corrected prices of energy, alcohol and tobacco), Christine Lagarde acknowledged that the rise in consumer prices was stronger than expected, also admitting that the risks were on the upside, while repeating that she was counting on a slowdown in here the end of the year. The ECB President also assured that the institution’s Governing Council would not take a hasty decision on monetary policy but did not reaffirm that a rate hike this year was “very unlikely”, as she had said at the last meeting.
“The ECB has taken a further step by estimating that inflation was higher than expected and that it could remain so for longer than expected, at least for several months.”, for Vincent Manuel, Chief Investment Officer at Indosuez Wealth Management. “What has also changed”, he continues, “is the perception of the labor market, which should at some point generate upward pressure on the level of inflation, but to a lesser extent than ‘in the United States or the United Kingdom. With a record unemployment rate of 7% and a participation rate back to pre-pandemic levels, the labor market is perceived to be very strong and could lead to upward pressure on wages, which the ECB does not yet see. This can be interpreted as a critical point that will have an impact on ECB policy in the future.”
Mr Manuel believes that “the ECB’s economic projections which will be published in March could revise upwards the inflation forecasts for 2022 and especially for 2023, as well as the forecasts for the labor market. On this last point, the ECB forecasts an unemployment rate of 7.3% in December 2022, a level already exceeded since it already stood at 7.1% in December 2021.”, and that “the ECB could accelerate the end of the purchases of assets under the APP in Q3 2022, which could pave the way for a rate hike in late 2022 or early 2023.”
Currency traders will approach this last straight line of the week under the sign of American employment, whose tensions are monitored like milk on the fire by a Fed whose role is to prevent any spiral of wages and price inflation. It is in this context that the results of the NFP report (Non Farm Payrolls), federal report on American private employment for the month of January will be dissected at 2:30 p.m. As a reminder on Wednesday, the private firm ADP highlighted a “destruction” of more than 300,000 jobs, where the financial community was rather expecting a soft landing, after almost 800,000 job creations in the private sector (excluding agriculture) in December. Yesterday, to be complete on the subject, weekly jobless claims for week 04 came out lower, beating expectations, at 238,000 units.
At midday on the foreign exchange market, the Euro was trading against $1.1740 about.
KEY GRAPHIC ELEMENTS
For the first time since June 16 (then on sudden break), the spot was close to its 100-day moving average (in orange), the underlying trend line still very significantly bearish. Traders will continue to adopt a posture of patience, awaiting a satisfactory entry point, as the consolidation that began in November’s fun takes on a much broader form.
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 1.1260 USD and the resistance at 1.1530 USD.
CHART IN DAILY DATA
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Source: Tradingsat
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