Last week saw some of the most volatile conditions for the Euro we’ve seen in a long time. During the stronger than expected interest rate hike announced on Thursday the Euro spiked reclaiming recently lost ground versus the US Dollar. However, the fun didn’t last long. During the press conference the message of economic uncertainty continued to shine through widening the chasm of expectations between the Euro zone and the United States. Last week’s event once considered in conjunction with the subsequent press conference left the Euro and Euro rates markets in a state of change.
When the valuations and assumptions of key currencies are brought into question the currency tends to exhibit heightened sensitivity to headlines. The market remains on tenterhooks from news flow from members of the ECB. Yesterday morning proved this sensitivity with comments claiming further oversized hikes could be on the table sending the Euro higher during European morning trading. This also sets the scene for potential risks in the Eurozone later this week.
This week eyes will be on the Federal Reserve as it delivers its latest decision. Markets are already pricing in a 75 basis-point hike leaving little room to reprice rates if the Dollar surprises to the upside leaving the highly improbable risk of a downside surprise only on the table. Markets will therefore be focussing on European data releases later in the week. These data include consumer confidence data on Wednesday in many Euro area nations. Perhaps even more importantly, unemployment and inflation data will be released en masse at the end of the week. Anticipate European volatility therefore whilst markets digest this data in a post 50-basis point hike environment.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Germany and the EU The Germany Supply Chain Act came into force in 2023 as a result of Germans wanting to do something good for employees in other countries in particular with respect to human rights and environmental issues. So far so good. But a combination of cost and bureaucracy overlaid with the difficulty of […]
US Dollar With the US Election just over 6 months away it is time to think about the implications for USD with a new President. In case you have missed it Trump plans In the event he wins to devalue USD to boost US exports as part of his MAGA philosophy. As we know ex […]
Japanese Yen With JPY at a new 34 year low versus EUR, the market is set for an ambush by the Bank of Japan if it acts today at the end of their Policy Meeting to support the Yen. The reason that the market is susceptible is because it has convinced itself that the BoJ […]