EUR/USD: ECB Not Fazed by Banking Crisis
The past week was marked by a large black candle when EUR/USD plummeted from 1.0759 to 1.0515. And this happened not on Thursday, March 16, when the ECB made a decision on the interest rate, but the day before. The reason for the weakening of the European currency was none other than the head of the National Bank of Saudi Arabia.
EUR/USD: USA Labor Market Stops USD
Jerome Powell played on the dollar side last week. Of course, the Fed Chairman knew that markets expected an interest rate increase of 25 basis points (bps) from the next FOMC (Federal Open Market Committee) meeting. But he did not rule out that his organization could take a more decisive step in an effort to curb inflation and raise it by 50 bp on March 22 at once. Moreover, it had been earlier expected that the rate would reach 5.00-5.25% at the peak. Now Powell and his colleagues do not rule out that its maximum value will be 5.50%. (According to Commerzbank strategists, even an increase to 6.00% is possible).
EUR/USD: Pause in the 1.0600 Zone
On Thursday, March 02, the DXY dollar index broke again through the bar at 105.00 points but could not stay there. As usual, the dollar was supported by an increase in US government bond yields. The yield on 10-year securities rose to its high since November 10 at 4.09%, the yield on 2-year securities rose to 4.91% and updated its maximum since 2007. The revision of US labor market statistics in Q4 2022 and the ISM Manufacturing Business Activity Index (PMI) in the country's manufacturing sector also supported the US currency. On the other hand, the dollar was pressured by the yuan, which is getting stronger against the backdrop of macro-economic statistics from China. The PMI manufacturing index in China was the highest since 2012. Activity in the service sector has also increased, and the Chinese real estate market has stabilized.
EUR/USD: FOMC Protocol Strengthens the Dollar
Macroeconomic statistics in both the US and the Eurozone look mixed. In both regions, inflation is slowing down (which is good), but GDP growth is also decreasing (which is bad for the economy). According to the US Department of Commerce, the pace of consumer spending growth in the country for Q4 was +1.4% after +2.3% in Q3 (forecasted at +2.1%). The US GDP growth rate on an annual basis, according to preliminary estimates, will be lower than expected, +2.7% (forecast and previous value +2.9%). However, despite this, labour market statistics look positive enough. The number of initial claims for unemployment benefits, forecasted at 200K, actually decreased from 195K to 192K. According to final data from Eurostat, inflation in the Eurozone slowed down to +8.6% YoY in January (+9.2% a month earlier). Things are becoming more difficult in Germany, the main locomotive of the European economy. According to January data, the annual inflation rate was +9.2% compared to +9.6% in December, but at the same time, the country's GDP also went down, with a decline of -0.4% (forecast and previous value -0.2%). The very fresh February CPI data did not please either, showing an increase from +8.1% to +8.7%.
EUR/USD: The Fed Doesn't Hinder the US Economy
January data released on Tuesday, February 14 showed that the US Federal Reserve's victory over inflation is still very, very far away. The core Consumer Price Index (CPI) remained unchanged on a monthly basis at +0.4%. At the same time, although the annual data were slightly lower than the previous value: +6.4% against +6.5%, they exceeded the forecast of +6.2%. Another portion of American statistics came out the next day, February 15. After two months of decline, retail sales in the US showed the highest growth rate in almost 2 years, jumping from -1.1% in December to +3.0% in January (against the forecast of +1.8%).
EUR/USD: The Fed's Doves Have Turned into Hawks Again
After the US Federal Reserve and ECB meetings, the DXY Dollar Index fell to a new 9-month low of 100.80 on February 02. This happened after the dovish hints of the head of the Fed, Jerome Powell, who, during a press conference following the meeting, admitted for the first time that "the deflationary process has begun." The market has decided that this is the beginning of the end, and that the end of the bullish wave is near.
EUR/USD: Three Weeks of Uncertainty
The meetings of the Central Banks were held strictly according to plan last week. As expected, the key rate was raised by 25 bps (basis points) at the US Federal Reserve meeting and reached 4.75%, and by 50 bps at the European Central Bank meeting, up to 3.00%. Since the decisions themselves did not bring surprises, market participants focused on the regulators' plans for the future.
EUR/USD: Next week: Five Days of Storms and Tsunamis
It seems that the whole world celebrated the Chinese New Year last week. There was some volatility in all major currency pairs of course, but we got an almost perfect sideways trend in the end. We will not deny the importance of the New Year holidays, but the reason for the lull, of course, is not in this, but in the key events that are coming next week.
EUR/USD: The Calm Before the Storm
The DXY Dollar Index (the ratio of the USD to a basket of six other major foreign currencies) has been moving in a fairly narrow sideways channel since January 12. A small surge in volatility was caused by the publication of data on retail sales in the US on Wednesday, January 18. However, everything returned to normal quickly, and DXY continued its eastward journey, sandwiched in the 102.00-102.50 range. EUR/USD behaved similarly, which, having started on Monday at 1.0833, completed the five-day period at 1.0855.
EUR/USD: Low Inflation Has Dropped the Dollar
The main event of the past week, which dealt another blow to the dollar, was the publication on Thursday, January 12, of data on consumer inflation in the US. The actual figures were fully in line with market expectations. The consumer price index (CPI) in annual terms fell to its lowest level since October 2021 in December: from 7.1% to 6.5%, and excluding food products and energy, from 6.0% to 5.7%. Thus, the US inflation rate has been slowing down for 6 months in a row, and core inflation has been slowing down for 3 consecutive months, which is a strong catalyst for easing the Fed's current monetary policy.
We talked a week ago about how economists from the world's leading financial institutions see the future of EUR/USD in 2023. However, our reviews have included two more major pairs for many years, USD/JPY and GBP/USD. And it would be unfair to ignore them this time. Moreover, after the euro, the Japanese yen and the British pound are the most significant components in the formation of the US Dollar Index DXY (13.6% and 11.9%, respectively).
But in addition to forecasts for the future, we will traditionally tell you what the experts' expectations were regarding the past, 2022, and how close they turned out to be.
We analyzed last week what happened to the two most popular currencies in 2020-2022, what forecasts were given then by the strategists of leading financial institutions for EUR/USD, and how accurate they turned out to be. Now it's time to tell what experts expect from 2023.
Traditionally, we publish currency forecasts from the world's leading financial institutions at the turn of the outgoing and coming years. We did this two years, and a year ago. Therefore, we can not only look into the future now, but also analyze whether experts were right in the past.
EUR/USD: The Fed Doesn't Want to be Dovish. The ECB Either.
The past week can be divided into two parts: before and after the FOMC (Federal Open Market Committee) meeting of the US Federal Reserve. The US inflation data produced a bombshell effect on the eve of this event, on Tuesday, December 13. The Consumer Price Index (CPI), with the forecast at 7.3%, fell in November from 7.7% to 7.1% (y/y), reaching its lowest level in almost a year, while core inflation fell from 6.3% to 6.0%. As a result, the market decided that since things were going so well, it was time for the Fed to turn from hawk to dove. Or at least ease their monetary policy significantly. Based on these expectations, the 10-year Treasury bond yield fell from 3.60% to 3.43%, and the DXY Dollar Index peaked and fell to its lowest levels over the past six months, from 105.07 to 103.60 points. Accordingly, stock indices (S&P500, Dow Jones, Nasdaq) flew up, and EUR/USD jumped to 1.0672.
EUR/USD: Ahead of the Fed and ECB Meetings
Two key events await us next week. The first is the FOMC (Federal Open Market Committee) meeting of the US Federal Reserve, which will be held on Wednesday, December 14. Recall that the key interest rate on the dollar is 4.00% at the moment, and that Fed Chairman Jerome Powell confirmed on November 30 that the pace of rate growth may slow down in December. These words of his convinced market participants that the rate would be increased in December not by 75 basis points (bp), but by only 50 bp. The actual developments on December 14 will set the mood of the regulator for 2023. Naturally, an important role here will be played not only by the decision on the interest rate itself, but also by the economic forecasts of the FOMC and the press conference of the management of this organization following the meeting.
EUR/USD: Focus on the US Labor Market
The DXY dollar index is down 5% over the past month. This is the largest monthly decline since September 2010. And the American currency lost more than 10% against the euro over the same period. EUR/USD was trading at 0.9541 back on October 28, and it reached the high of 1.0544 on December 2. There are several reasons for this, and the main one, of course, lies in the US Federal Reserve's interest rate forecasts.
EUR/USD: FOMC Protocol Dropped the Dollar
Last week ended quietly: the US celebrated Thanksgiving. But its first part was marked by the weakening of the dollar, as a result of which EUR/USD rose by more than 200 points, from 1.0222 to 1.0448. It has risen above its 200-day moving average (SMA) for the first time in 17 months, since June 16, 2021.
EUR/USD: The Pair Is at a Crossroads
We wondered at the beginning of the last review if the dollar rally had come to an end. Let us recall that the US inflation data published on November 10 turned out to be significantly better than both previous values and forecasts. Core consumer inflation (CPI) rose by 0.3% in October, which was lower than both the forecast of 0.5% and the previous September value of 0.6%. The annual growth rate of core inflation slowed down as well to 6.3% (against the forecast of 6.5%, and 6.6% a month ago).
EUR/USD: Is the Dollar's Growth Over?
Has the dollar rally come to an end? The answer to this question sounds more and more affirmative day by day. The reason for the weakening of the US currency lies in the interest rate of the Fed. This, in turn, depends on the state of the labor market and inflation in the US, which determine the regulator's monetary policy.
EUR/USD: Slower, Longer, Higher
Overall, last week passed, as predicted, without any majorsurprises. The main event was the FOMC (Federal Open Market Committee) meeting of the US Federal Reserve on Wednesday, November 2, at which it was unanimously decided to raise the key rate by 75 basis points (bp) to 4.00%. This is the highest level since 2008. Such a move was quite expected. Therefore, the subsequent press conference of the regulator's management was of greater interest to market participants. Fed Chairman Jerome Powell said at the meeting that although inflation must be reduced "drastically", monetary policy parameters can be changed as needed. The hint was that the pace of rate hikes could slow down from December, but the final rate level would likely be higher than previously thought.
EUR/USD: Is the Interest Rate Race Close to Its End?
EUR/USD grew until Thursday, October 27, and even rose above the landmark level of 1.0000, reaching 1.0092. The reason for this, most likely, was the hope of a number of investors that the ECB would raise the rate not by 0.75, but by 1.0 or even more basis points (bp) at its meeting. However, their dreams remained dreams. There happened exactly what most market participants expected: the European regulator raised the rate by 0.75 bp, from 1.25% to 2.0%. (Although this figure is the highest over the past 10 years).
EUR/USD: Market, Are You Crazy?
Throughout the first half of the week, EUR/USD moved sideways along the 0.9700 horizon as markets waited for the release of US inflation data. And it was on Thursday, October 14 that the Department of Labor Statistics of the country published fresh values of the Consumer Price Index (CPI), which exceeded the forecast values. In monthly terms, the September CPI reached 0.6% against the forecast of 0.5%, in annual terms - 6.6% against the forecast of 6.5% and the previous value of 6.3%.
EUR/USD: It's Getting Worse in the EU, It's Getting Better in the US
EUR/USD updated another 20-year low on September 28, bottoming at 0.9535. This was followed by a correction, and the pair came close to the parity level on Tuesday, October 04, rising to 0.9999. However, the happiness of the bulls was short-lived, followed by another reversal to the south and the finish line at 0.9737.
EUR/USD: In Search of a New Bottom
Last week, all the attention of the markets was focused on the FOMC meeting of the US Federal Reserve, which took place on September 21. The probability of another rate hike by 75 basis points (bp) had been estimated at 74%, and by 100 bps at 26%. The first forecast turned out to be correct: the rate was increased from 2.50% to 3.25%. But this was enough for the DXY dollar index to fly up and exceed 113.00 points, updating another 20-year high. Accordingly, as expected by the majority (75%) of experts, EUR/USD has renewed another 20-year low, reaching the bottom at 0.9667.
EUR/USD: Ahead of the US Federal Reserve FOMC Meeting
The World Bank said last week that risks of a recession in 2023 are growing amid simultaneous tightening of monetary policy by the world's leading Central banks and the energy crisis in Europe. According to Citigroup strategists, the dollar remains the only safe haven for investors to hedge against the risk of drawdown in investment portfolios.
EUR/USD: Two Events of the Week
The past week was marked by two significant events. First, the EUR/USD pair updated its 20-year low on Tuesday, September 06 once again, falling to 0.9863. And then the European Central Bank raised its key interest rate for the first time in its history by 75 basis points (bp) to 1.25% on Thursday, September 08, accompanying this act with very hawkish comments.
EUR/USD: Rather Boring Week
The past week was, boring, so to say. The macro statistics released from August 30 to September 2, although versatile, turned out to be quite close to market expectations. For example, the harmonized consumer price index in Germany, was 8.8%, with the forecast of 8.8%. The consumer price index in the Eurozone amounted to 9.1% instead of the expected 9.0%. The index of business activity in the US manufacturing sector (PMI) did not change at all over the month and amounted to 52.8 (forecast 52.0), and the number of new jobs created outside the American agricultural sector (NFP) did not go far from the expected either, 315K against 300K. As a result, EUR/USD was moving along the parity line of 1.0000 all five days, fluctuating in the range of 0.9910-1.0078, and completed the five-day period at the level of 0.9955.
EUR/USD: The Global Economy Is in Danger Again
So, EUR/USD broke through the key support level formed in 2016. It fixed a low at 0.9899 on Tuesday, August 23, the low the pair traded 20 years ago, in November-December 2002. The euro lost about 485 points to the dollar lover the past year alone.
EUR/USD: Back to 1:1 Parity
EUR/USD has been moving sideways in the 1.0100-1.0270 channel for more than three weeks. All attempts to break through its upper or lower border ended in failure. This movement continued until August 10, when, after the publication of data on inflation in the US, the pair went up sharply, turning the level of 1.0270 from resistance into support. However, the bulls' joy was short-lived. Just two days later, the pair returned to the channel, broke through its lower border on Thursday, August 18, and ended the week at 1.0039.
EUR/USD: Weak Inflation Weakens Dollar
EUR/USD has been moving sideways in the 1.0100-1.0270 channel for more than three weeks. Attempts to break through its upper or lower border ended in failure each time. Even very strong data on the US labor market, which came out in the first week of August, did not help the dollar. Recall that unemployment in the US has remained at 3.6% since March, which is a very good indicator. And it became even lower in July, 3.5%. And such an important indicator as NFP, the number of new jobs created outside the agricultural sector, with a forecast of 250K, actually reached 528K. And this despite the fact that it was 372K a month earlier.
