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The Week Ahead – Extended tightening turns market risk-off



EURUSD falls due to tightening by the US

Chart of EURUSD

The rate gap between Atlantic and Euro remains significant, which means that the euro will fall. Spring began with relief at Europe’s ability to dodge the bullet, thanks to falling energy prices. The eurozone’s latest PMI saw expansion, which is considered an indicator of strong economic fundamentals. It is possible that the much-talked about recession will not be as severe as predicted. The markets expect at least two rate hikes from the ECB. The Fed is determined to push the Fed further, but the single currency is trailing in terms of the final rate. The pair is testing this year’s low at 1.0500 1.0800 This is a new resistance.

As optimism fades, the Australian Dollar falls

Chart of AUDUSD

As market sentiment is skewed by the possibility of tighter lending, the Australian dollar falls. The wage growth has been steady and the RBA could push the peak rates higher than the 4.1% currently anticipated. Although the central bank has already indicated that more rate increases are on the horizon, this hawkish pivot is barely supporting its currency. It means that the fight against inflation remains far from over, and restrictive conditions could continue for the foreseeable future. A moderated risk appetite

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