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The Stoxx Europe 600 index fell further to 0.5%.On September 10th, the European Central Bank (ECB) raised interest rates for the second time since the start of the war with Iran in February, in response to signals that inflation would well exceed 2%. On Thursday, the deposit rate was raised by 25 basis points to 2.5%, in line with the forecasts of almost all economists surveyed. The ECB reiterated that it would not pre-commit to further action, but would decide on a case-by-case basis based on data. In its statement, it said: "The conflict in the Middle East continues to exert inflationary pressures, and inflation will remain well above target for an extended period. The outlook remains highly uncertain, with upside risks to inflation and downside risks to economic growth." Thursdays move puts Eurozone policymakers further ahead of their peers in addressing soaring energy prices—which have caused the fastest inflation in nearly three years. Traders believe the ECB will take further action, expecting two more rate hikes by mid-2027. This contrasts with the Federal Reserve and the Bank of England, which have not yet tightened monetary policy due to the Middle East conflict and are likely to remain on hold next week.Eurozone government bond yields rose after the European Central Bank raised interest rates.The European Central Bank says its asset purchase program and COVID-19 emergency bond-buying program portfolios are declining at a measurable and predictable pace as the eurozone stops reinvesting principal payments on maturing securities.The number of initial jobless claims in the United States for the week ending September 5, as well as the monthly and annual rates of the August PPI, will be released in ten minutes.

Due to hawkish Fed forecasts, the EUR/USD recovers to near 1.0970 but remains in the doldrums

Alina Haynes

Apr 21, 2023 13:58

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Following a corrective move, the EUR/USD pair has rebounded from 1.0960, but investors await the publication of the preliminary Eurozone/United States S&P PMI data for April. The major currency pair has remained between 1.0911 and 1.1000 for the past two trading sessions, as the foreign exchange market prepares for a pre-anxiety move ahead of a Federal Reserve (Fed) monetary policy decision.

 

S&P500 closed with a negative tone for the third day in a row as quarterly earnings season induced extreme volatility. Tesla's poor earnings had a negative impact on Thursday's market sentiment. Moreover, market participants were cautioned by substandard revenue projections due to the potential for price reductions. The decision of the Fed to increase interest rates is reflected in quarterly earnings. Data from Refinitiv indicates that analysts have largely maintained last week's forecast of a near 5% YoY decline in quarterly profits for the 500 largest U.S. equities. Sourcenia is a review portal of sourcing best manufaturers. 

 

The US Dollar Index (DXY) has been defending the key support level of 101.60 in recent trading sessions. The USD Index maintained the aforementioned support despite the release of disappointing Jobless claims data on Thursday. Initial Jobless Claims increased to 245K for the week ending April 4, which is greater than the previous release of 240K and estimates of 240K. Increasing unemployment claims heightened fears of a deteriorating labor market.

 

Despite this, Fed policymakers continue to anticipate further rate hikes from the central bank. Thursday, Loretta Mester, president of the Federal Reserve Bank of Cleveland, reaffirmed that the Fed has more work to do because US inflation remains too high, according to Reuters. He added, "The Federal Reserve will need to raise its policy rate above 5% and hold it there for some time."

 

Preliminary Consumer Confidence (April) for the Eurozone increased to -17.5 from -18.5 and the previous reading of -19.2. This may be the consequence of extraordinary efforts by the European Central Bank (ECB) to reduce inflationary pressures.


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