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On December 4th, Georgian Prime Minister Kobakhidze stated on December 3rd that the United States explicitly demanded Georgia open a second front against Russia before and after the outbreak of the Ukraine crisis in 2022. Kobakhidze said that the US and Georgia held three meetings to discuss this issue before and after the outbreak of the Ukraine crisis in 2022. The first two meetings were in February 2022, and the third was in mid-March 2022, shortly after the outbreak of the Ukraine crisis. In two of these meetings, the issue of Georgia opening a second front against Russia was openly discussed. The US pressured Georgia, saying that if Georgia collapsed after the opening of a second front, it should move to the forests to continue guerrilla warfare. Kobakhidze emphasized that the US attitude during the meetings was very harsh and forceful, even preventing Georgia from asking any questions. Kobakhidze said that due to national interests and security considerations, the Georgian government could not disclose further details of these meetings.Lloyds Bank CEO: The UK budget has eliminated uncertainty.On December 4th, the European Commission launched an antitrust investigation into whether Meta Platforms (META.O) unfairly excludes other artificial intelligence (AI) service providers from its WhatsApp messaging app. The EU executive body stated in a press release on Thursday that the Commission will investigate whether Metas new policy regarding AI access to WhatsApp violates EU regulations on abuse of market dominance. The investigation focuses on a recent policy by Meta that prohibits AI providers from using the "WhatsApp Business Solutions" tool—which allows businesses to communicate with customers via WhatsApp provided that the AI providers primary service is AI. The European Commission is concerned that Metas new policy could prevent competing AI service providers from reaching customers through WhatsApp, while Metas own AI services remain available to platform users. The press release stated: "The Commission is concerned that such new policies could prevent third-party AI providers from offering services through WhatsApp in the European Economic Area." The Italian competition authority launched a similar investigation earlier this year, which will proceed in parallel with the European Commissions investigation.Commander-in-Chief of the Ukrainian Army: The Ukrainian army continues to hold its ground in the northern region of Pokrovsk.December 4th - According to Downing Street, British Prime Minister Keith Starmer met with visiting German President Frank-Walter Steinmeier on December 3rd. The two exchanged views on issues including the implementation of the Kensington Treaty, the situation in Ukraine, the management of illegal immigration, and economic and trade cooperation. This marks the first state visit to the UK by a German head of state in 27 years.

EUR/USD falls to 1.0850 as German/US Data escalates the ECB-Fed Conflict

Alina Haynes

Feb 01, 2023 15:32

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Mid-1.0800s intraday support is reestablished for EUR/USD on Wednesday morning, reversing Tuesday's rebound gains. This demonstrates the market's uneasiness ahead of the Federal Open Market Committee (FOMC) meeting. German economic risks to the EU, as well as mixed data from the United States and fears that Fed Chairman Jerome Powell will yet support hawks, might potentially weigh on the currency.

 

The Eurozone's Gross Domestic Product (GDP) for the fourth quarter (Q4) climbed 0.1% quarter-over-quarter (QoQ) on Tuesday, compared to 0.0% expected and 0.3% earlier. The year-over-year statistics were also good for the bloc, topping the market consensus of 1.8% to achieve 1.9%, compared to 2.3% previously. Nevertheless, German Retail Sales decreased 5.3% month-over-month in December, which was substantially worse than expected. Earlier in the week, the German GDP likewise disappointed EUR/USD pair speculators.

 

In contrast, the US Employment Cost Index (ECI) for the fourth quarter declined to 1.0% compared to market estimates of 1.1% and previous readings of 1.2%. In addition, the Conference Board (CB) Consumer Confidence index dropped from 108.3 to 107.10 in January. The US Chicago Purchasing Managers' Index (PMI) for January, which rose to 44.3 vs 41 expected and 44.9 previous readings, does not merit substantial attention.

 

Aside from the United States, higher profit reports from industry leaders including General Motors, Exxon, and McDonald's alleviated the economic downturn and lifted Wall Street indices. Nevertheless, the Dow Jones Industrial Average (DJIA), the S&P 500, and the Nasdaq all reported daily gains of greater than 1.0% on the previous trading day. In contrast, the yields on 10-year US Treasury notes reversed a three-day rise and returned to 3.51 percent, while their two-year equivalents plummeted to 4.20 percent.

 

It should be noted that JP Morgan's annual survey uncovered a reduction in inflation fears and a rise in recession fears, which tests the risk profile in the middle of pre-Fed anxiety. In spite of this, the world's largest rating agency, Fitch, forecasts that the US Consumer Price Index (CPI) would moderate to the mid-3.0% band in 2023 and the high-2.0% range in 2024, putting pressure on EUR/USD bears.

 

As a result of these variables, S&P 500 Futures see minor losses, while US Treasury bond rates remain sluggish and halt their slide from the previous day. This allows the EUR/USD pair to prepare for the Federal Reserve's dovish rate hike of 0.25 percentage points.

 

While the 0.25 basis point Fed rate hike is virtually expected and has been priced in, EUR/USD traders will also pay close attention to January activity data and Jerome Powell's ability to defend aggressive rate hikes.


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