(News Bulletin 247) – As on the equity markets, volatility remained intense on the currency pair, in the tormented context of the geopolitical situation between Russia and NATO. “The risk factor remains an escalation of the Ukrainian conflict which would lead to very significant increases in energy prices”, for Bénédicte Kukla, Senior Investment Officer at Indosuez Wealth Management, who does not hesitate to note that in this context, the markets have now priced in six to seven interest rate hikes [fédéraux] in 2022.
The White House had warned last week that the Russian army is now ready to invade Ukraine at any time if President Vladimir Putin decides. Americans still residing there are therefore called upon to leave the country without delay. “If a Russian attack on Ukraine does occur, it will likely begin with aerial bombardments and missile strikes which could obviously kill civilians, regardless of their nationality. A ground invasion in the aftermath would involve the use of a massive force. With virtually no notice, communications to arrange a departure could be severed and trade routes interrupted,” said Jake Sullivan, national security adviser to President Joe Biden.
As a reminder on US inflation, the statistical high point on Thursday, the consumer price indices came out markedly higher, beyond expectations, and thus raising fears of a faster and stronger turn of the screw on the part of the Fed. Excluding food and energy (elements considered volatile), prices rose monthly by 0.6% in December, against a consensus of +0.5%. Already in November, these prices rose by 0.6%. At an annualized rate, prices are rising by 6%, unheard of since August 1982. Including energy and food, annual inflation is 7.5%. The Treasuries at 10 years have immediately crossed the 2% threshold. What relaunch the scenario of a “double” increase in federal rates next month, namely a rise of 50 bps at once.
Regarding European monetary policy, the turn of which naturally promises to be less tight than that of the Fed, “the President and Chief Economist of the European Central Bank (ECB) warned against a “hasty” increase in interest rates interest, highlighting the differences between the euro zone and the United States. Yet there are fundamental arguments in favor of an ECB rate hike in the second half of 2022″, notes César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management
This Tuesday marks the return of statistics, with a dense program. RAS concerning the first estimates of quarterly GDP in the Euro Zone (+0.3% for Q4 from one quarter to the next), with no deviation from the consensus. On the other hand, the targets have been missed for the ZEW index of confidence in the German economy (54.3) and for the December trade deficit (-9.7 billion euros).
“Germany’s economic outlook continues to improve in February despite growing economic and political uncertainties. Financial market experts expect an easing of pandemic-related restrictions and an economic recovery in the first half of 2022. They still expect inflation to come down, albeit at a slower pace and from a higher level than in previous months, so more than 50% of experts now expect inflation rates to fall. ‘Short-term interest in the Eurozone will increase over the next six months,’ commented ZEW Chairman Professor Achim Wambach.
To be monitored on Tuesday for the United States, the producer price index and the manufacturing index Empire State at 2:30 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.1350 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. My very broad consolidation took shape below $1.1460 which is a chart resistance level. The field is immediately open towards the lower limit of this very wide range, around $1.1115. Currency traders will however avoid taking an immediate position in the absence of a satisfactory entry point.
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 1.1260 USD and the resistance at 1.1360 USD.
CHART IN DAILY DATA
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