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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. An ECB survey showed that inflation expectations fell from 5.0% down to 4.9% across the bloc over the next 12 months. However wage growth is likely slowing down, negating attempts to tame price rises. Despite some dovish voices in the ECB survey, it is widely regarded assertive. That explains why euro has held relatively strong against the greenback, especially since the Fed hinted that it might double down on its tightening agenda. 1.0480 It is a key floor. 1.1000 A major ceiling

GBPUSD crashes as BoE policy falls behind

Chart of GBPUSD

The pound is falling as traders wager that the BoE policy will not keep up with the Fed’s pace. According to the UK central bank, it appeared that it was nearing the end of 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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