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The Week Ahead – Risk mitigation

The Week Ahead – Risk mitigation

EURUSD recovers after narrowing rate gap

Chart of EURUSD

The pace of tightening across Atlantic differs and the euro rallies. To avoid panic, the Fed will have to balance between sticky inflation and fragile banking sector. Markets were reassured by the suggestion that rates could be stopped, even though it is conditional. While most of the burden seems to be on the Fed’s shoulders as investors are cautious about small US lenders, the ECB may pursue its tightening with relatively lesser impact. The narrowing rate differential would be good for the euro. 1.0480 This is the nearest support and 1.1000 The resistance is ahead

In the hope of a dovish RBA, the AUDUSD falls

Chart of AUDUSD

The Australian dollar continues to strengthen as traders anticipate an inflation spike. Although RBA officials have tried to minimize the impact of global banking stress on domestic institutions, liquidity worries could still be a factor in monetary policy. Minutes of the March decision revealed that the central banks would consider a pause for April to allow rates to reach the economy. This would give more weight to the CPI and retail readings. Another drop in February’s inflation…

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