London 11/3/2022
A week full of news, events, and announcements comes to an end. The peace talks between Russia and Ukraine in Turkey did not develop any progress regarding a solution to the war. Today things are much different: Russian President Vladimir Putin cited that there are positive developments in talks and this statement has caused optimism and better sentiment in the markets. The major stock indices turned bullish, the gold performed a sharp decline below the support of $1,976, and the WTI (Crude oil futures) has dropped to $107.
As per the announcements and the markets news. yesterday we had two major events. At the ECB session for the monetary policy and the interest rates, the interest rates remained unchanged at 0% but Mrs. Christine Lagarde announced that the APP (Asset Purchase Programme) will end during the 3rd quarter of 2022, instead of the end of the year. This statement was interpreted by the markers as a pioneer of interest rates hike before the end of the current year. Yesterday also, the inflation rate in the US was announced at 7.9%, as the markets expected but significantly higher than the 7.5% of the previous month. Before this announcement and due to the war in Ukraine, markets were giving more credits to a 0.25% rate hike at the Fed session, next Wednesday, March, 16th but after this high inflationary rate, most of the analysts believe that a 0.50% hike has a better chance. Until last Wednesday, the US dollar was bearish but during the last two days, it performs recovering attempts. The bond yields rise and the US 10-year bond yield has exceeded 2%.
EURUSD (current price 1.1004) is bullish this week, helped by the improved markets’ sentiment and the perception of the markets that there may be one or more interest rate hikes from ECB by the end of the year. Just after the media released Putin’s statement “there are certain positive shifts, negotiators on our side tell me” the pair developed a strong uptrend up to 1.1043 but pretty soon it dropped below 1.10 again. There’s a balance point at 1.10 and EURUSD is trying to find a direction. Any positive or negative news regarding the war in Ukraine will affect the pair significantly through the risk mood. A risk-on mood favors the euro while a risk-aversion mood favors the US dollar as a more safe investing solution.
GBPUSD (current price 1.3097) is very bearish this week having lost the important support at 1.3165. The US dollar is relatively stronger but the sterling is getting weaker even if the UK announcements, earlier today, were not bad at all. More specifically, the UK GDP in January rose by 0.8% vs -0.2% in December, industrial production rose 0.7% vs 0.3% in the previous month, and the manufacturing production 0.8% vs 0.2%. These announcements concern the situation before the war so it makes sense for the markets to ignore it. An approaching of 1.30 is a realistic scenario.
USDJPY (current price 116.92) has managed to break out the important resistance and multi-year high price at 116.35 and it has developed a strong uptrend. The US dollar became stronger after the high inflation that was announced and with the help of the rising bond yields, the pair managed to move around the price area of 117. But there was more bullish help: the markets’ sentiment is getting better, throwing away many investors from risk-off investing selections such as the Japanese currency. The only help that JPY took this week, was the increased rate of the Producer Price Index which could make some investors think that the Bank of Japan is eager to take action. Given the strong uptrend, the next resistance for USDJPY is 118.70.
DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
