Latest EU Interest Rate Outlook

Markets anticipate that the ECB will raise interest rates by another 50 basis points at its monetary policy meeting on Thursday in order to keep inflation under control after lifting rates by 3% since July of last year.

According to the minutes of the February ECB meeting, the price index shows no signs of contraction or stabilization, raising concerns that price pressures persist. The market continues to strengthen expectations of an additional 50 basis point hike by the ECB at its May 4 meeting, with ECB President Christine Lagarde will be making fresh pronouncements on the direction and amount of the interest rate hike during a policy meeting on Thursday.

Based on the most recent inflation data, core inflation in the eurozone remained high last month. Germany's harmonised consumer pricing number for comparison with the rest of the EU were up 9.3% year on year in February, although it was only 1.0% higher in January.

The annual inflation rate in Greece decreased to 6.5% in February from 7.3% in January. Meanwhile, headline inflation dropped to 6.1% in February from 7.0% in January. Last month, food and nonalcoholic beverage prices increased 14.5% year on year, while transportation fares increased 7.9% and housing costs decreased 4.9%.

Due to the fall in energy costs, Italian industrial producer prices fell significantly in January to the same level as in the summer of 2021, down 7.5% month over month in January but up 11.1 percent compared to the same month last year. According to Italy's national statistical bureau ISTAT, the rapid decline in retail prices in the domestic energy market and natural gas prices were primarily responsible for the sharp slowdown in industrial producer pricing.

However, recent US bond yields and European bond yields fell on Monday as the market examines a new trend for the direction of central banks and after US government organizations moved to support Silicon Valley Bank and Signature Bank over the weekend. As a result, the market is wagering that concerns about financial stability will prevent the Federal Reserve and the European Central Bank from hiking interest rates anytime soon. While inflation remains over the 2% objective.

The three-month Treasury yield plummeted 30 basis points to 4.66%, ruling out the possibility of the Fed raising interest rates at next week's meeting until the SVB and SB issues are handled. Most investors expect the Fed to raise the FFR target by another 25 basis points to a range of 4.75%-5.0%.

Meanwhile, the three-month German bill yield decreased only 17 basis points to 2.70%, as the European Central Bank maintained its commitment to increasing interest rates by 50 basis points at each policy meeting.

The halt in interest rate increases is anticipated to be a temporary solution until the fallout from Silicon Valley Bank and Signature Bank is fully under control. This is consistent with the two central banks' desire to maintain their steadfast stance on the necessity of containing inflation. As a result, the euro tends to be slightly stronger than the dollar during this period.

Data for Technical Analysis (5H) CFD EUR/USD

Resistance : 1.0733, 1.0736, 1.0742

Support : 1.0721, 1.0718, 1.0712 

5H Outlook

1H Outlook

Source: Investing.com                                       

Buy/Long 1 If the support at the price range 1.0716 - 1.0721 is touched, but the support at 1.0721 cannot be broken, the TP may be set around 1.0733 and the SL around 1.0713, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0733 - 1.0738, TP may be set around 1.0745 and SL around 1.0720, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0733 - 1.0738 is touched, but the resistance at 1.0733 cannot be broken, the TP may be set around 1.0718 and the SL around 1.0741, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0716 - 1.0721, TP may be set around 1.0709 and SL around 1.0736, or up to the risk appetite.       

Pivot Points Mar 14, 2023 03:23AM GMT

Sources: Investing 1, Investing 2