EURUSD Lower After Lagarde Comments
Warning From Lagarde
The Euro is struggling to capitalise on USD weakness today following some commentary from ECB chief Lagarde this week. The ECB head warned that the global economy was getting harder to anticipate as a result of fluctuating energy prices, geopolitical tensions and shifts in trade routes and networks. Global inflation is forecast to rise to 4.7% this year as a result of the ongoing upward pressure on food and energy prices as a result of various ongoing geopolitical conflicts. As such, Lagarde has warned the second-round inflation risks remain a key threat, particularly if a lift in wages is seen. For now, though, Lagarde signalled that the ECB is not identifying any second-round pass through from the rise in energy prices in particular. These comments have reinforced the view that the ECB is unlikely to tighten again near-term, keeping EUR skewed lower for now.
US Inflation
Looking ahead today, US inflation will be the key event to monitor. Any further strength in CPI data will drive a hawkish repricing of Fed rate-hike expectations, driving EURUSD lower. On the other hand, if data undershoots today, this could fuel a correction lower in USD as hawkish expectations are scaled back, helping EURUSD recover into the weekend.
Technical Views
EURUSD
The sell off in EURUSD has seen price breaking down through 1.1205 last, where the market is currently stalled. While below here, risks of a continued push down to 1.1067 are seen. However, momentum studies are recovering firmly and if price can get back above that level, we could see a recovery squeeze back towards 1.1401 near-term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.