EUR/USD Feeling Uncertain As the ECB Remains Mixed About Rate Hikes
EUR/USD Feeling Uncertain, EUR/USD has been bearish since the beginning of summer 2021, after the FED surrendered to inflation and started to accept that it was surging out of control, as CPI (consumer price index) inflation increased above 5%. Markets anticipated that the FED was going to start tightening the monetary policy, which they did by reducing monthly QE purchases by $15 billion last year and now they are planning to start increasing interest rates.
As a result, the USD turned bullish across the board and EUR/USD has been bearish since then, losing around 10 cents. Inflation has increased further since then, reaching 7.5% in Janaury, which is enormous, although inflation has been growing everywhere and in the Eurozone it stands at 5.1%, as today’s CPI report showed.
EUR/USD Daily Chart Analysis – The Price Is Stuck Between MAs
Eurozone January Released by Eurostat – 23 February 2022 CPI
- January final CPI YoY +5.1% vs +5.1% prelim
- December CPI was +5.0%
- Core CPI YoY +2.3% vs +2.3% prelim
- December core CPI was 1.9%
No change to the initial estimates as this just reaffirms stronger euro area inflation to kick start the year. We’ll see how the trend develops in the months ahead as that will either help to keep or reduce the pressure on the ECB to hike rates. The ECB doesn’t sound extremely concerned; it sounds more uncertain, hoping that inflation will cool off later this year. So, the Euro remains uncertain as EUR/USD shows, while other risk currencies are making some decent gains against the USD today as risk sentiment improves.
EUR/USD Feeling Uncertain, Remarks by ECB policymaker, Robert Holzmann
- It is possible for ECB to hike rates before ending bond purchases
- ECB could take hike rates in the summer, then act again at the end of 2022
That’s slightly a more hawkish message but it just underscores a lot of mixed rhetoric from the ECB as of late. I don’t think we’ll get many answers in March so that means every meeting after that may be somewhat of a “live” one in terms of understanding when the ECB may or may not act later in the year.
