Market Drivers – US Session 24/03/2023

Mohamed Abdelhamid 25 March, 2023 2:34 am Forex Market, Market Update

It is predicted that the EUR/USD will end the week with respectable gains of 0.89%. The US economy slowed down overall on Friday, according to mixed economic data. The goal of ECB officials is still to lower the Eurozone’s high inflation rates.

Key Developments

Joachim Nagel, the president of the Bundesbank, said that a break is not necessary since it will take too long for inflation, which is currently running around 6% in Germany, the largest economy in the euro zone, to return to the ECB’s 2% target. Nagel stated in Edinburgh that “wage developments are expected to prolong the current period of high inflation rates.” In other words, inflation will persist longer.

Nonetheless, as long as it continues above 1.0759, the triple bottom chart pattern is still in effect. The EUR/USD was unable to maintain its prior gains. The latter’s violation would render the pattern invalid and leave room for additional losses. The initial resistance level on the upswing would be at 1.0800, followed by 1.0900, and then the YTD high at 1.1032.

EUR/USD decreased 0.64% or 69 pip as the New York session came to an end. The Euro was pressed by a banking crisis that threatened to expand to the Eurozone, which made the common currency weaker. A risk-on instinct did not assist the situation. The EUR/USD exchange rate is 1.0759 at this time.

The decline in the EUR/USD rate is attributed to both weak EU PMIs and a strong US dollar. The US stock market is expected to have a successful week’s end despite encountering more turmoil. Due to worries about a potential collapse, Deutsche Bank’s stock fell precipitously, as seen by a 220 basis point spike in Credit Default Swaps (CDS).

Wall Street was hurt at the start of the session, but investors seemed to ignore these worries and instead made predictions about the Federal Reserve (Fed) cutting interest rates in 2023.

Wall Street gained ground for the week. Due to worries that the bank would fail, as seen by the 220 basis point increase in Credit Default Swaps, Deutsche Bank’s stock fell sharply (CDS). Wall Street traders were initially concerned about this, but eventually discounted their worries, betting instead that the Federal Reserve (Fed) will lower interest rates in 2023.

According to James Bullard, president of the St. Louis Fed, rates should be hiked even more to achieve a range of 5.50%–5.75%, which would need 75 bps more rate increases than the Fed’s most recent increase of 4.75%–5.00%. Raphael Bostic, president of the Atlanta Fed, said that the decision reached in March was difficult because there had been much discussion and it had not been an easy one.

As they arrived at the conference, Thomas Barkin, the president of the Richmond Federal Reserve, said he thought the banking industry was quite stable. As a result, the environment was favourable for carrying out monetary policy as anticipated.

Economic Data

In March, the S&P Global PMI improved, outperforming forecasts and information from the previous month. Durable Good Orders decreased by 1% even though the Manufacturing Index remained in contraction, which was nevertheless an improvement above the figure from the previous month.

The S&P Global PMIs for March in the Eurozone were favourable overall, with the exception of the Manufacturing component, which remained in a recessionary state. According to policymakers at the European Central Bank (ECB), led by its president Christine Lagarde, there is no trade-off between price and financial stability.

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