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The Week Ahead – Data confirmation



EURUSD consolidates prior to ECB hike

Chart of EURUSD

The euro continues to strengthen as another 50-bp rate rise seems to be a done deal for this week. The markets are betting that the ECB will raise its interest rate by a full percentage point in the next few months. According to an ECB survey inflation expectations fell across the bloc between 5.0% and 4.9% for 12 months. However wage growth is likely, negating efforts at taming prices. Despite some dovish voices the ECB is widely regarded to be assertive. This explains why the euro has held relatively stable against the greenback, particularly after the Fed suggested that it would double down on its tightening agenda. 1.0480 It is the most important floor. 1.1000 Major ceiling

GBPUSD falls as BoE policy is behind

Chart of GBPUSD

As traders speculate that the BoE policy might not be as fast as the Fed, the pound falls. According to the UK central banks, it appears that it is nearing the end its tightening cycle. However, the market is pricing in a 25 bp rate increase at the March policy meeting following the Fed’s lead to push even higher. Nevertheless, the pound’s relative weakness reflects the divergence in hawkishness across the pond due to stronger US economic fundamentals. The US could reverse any market movement triggered by the UK’s unemployment rate.

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