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The Week Ahead – Risk mitigation

The Week Ahead – Risk mitigation

EURUSD recovers after narrowing rate gap

Chart of EURUSD

As tightening moves across the Atlantic, the euro is able to rally. The Fed must keep the needle moving to avoid panicking, despite sticky inflation and fragility in the banking industry. 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

The AUDUSD drops in the hopes of a dovish RBA

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 from the March decision indicated that the central bank would consider a pause in April in order to allow rates to flow through to the economy. This would give more weight to the CPI and retail readings. Another drop in February’s inflation…

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