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The Week Ahead – Extended tightening turns market risk-off



EURUSD falls due to tightening by the US

Chart of EURUSD

As the rate gap between the Atlantic and Europe remains large, the euro is set to fall. Spring has started with relief that Europe may have escaped the bullet because of falling energy prices. According to the latest PMI, there was expansion in the eurozone. This is considered a sign that economic fundamentals are strong. It is possible that the much-talked about recession will not be as severe as predicted. Markets anticipate at least two rate rises from the ECB. The Fed has been determined to push even further so the single currency is trailing the terminal rate. The pair is testing this year’s low at 1.0500 1.0800 It is an innovative resistance.

As optimism fades, the AUDUSD falls

Chart of AUDUSD

As the prospect of tightening market sentiment, the Australian dollar is weakening. The wage growth has been steady and the RBA could push the peak rates higher than the 4.1% currently anticipated. While the central bank has signalled that there will be more rate hikes, its hawkish pivot does not support its currency. It means that the fight against inflation remains far from over, and restrictive conditions could continue for the foreseeable future. Reduced risk appetite

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