The heavy shadow of war on the European economy
Today, Thursday, April 14, the European Central Bank members will meet to decide about the ECB's policies and interest rate.
While 2020 was one of the worse economic periods in Europe and many other areas, we have to accept that 2022 also can be a challenging year for EU members. So far, 2022 was tough for Euro Zone with increasing tensions in its eastern borders. War in Ukraine and millions of refugees sure will be a double pressure on its labor market.
At the same time, with increasing inflation and higher prices, consumer excess savings and spending power also seem much weaker than in 2021. This situation, news, reports, and data together decreased the GDP estimates for this block in 2022, down to 3%. Bak in 2021, Eurozone GDP growth printed a 5% annual growth.
In addition, Eurozone inflation has moved sharply higher. The latest numbers show inflation above 7.5% for the block. However, still expecting the ECB to increase the rates, would not be too much close to the reality, but they can start taper the asset purchases. For interest rates, the most hawkish decision will be announcing the possible date for a 25bp rate hike in 2022.
We should not forget that the current diversion between the major central banks and ECB can hold the pressure still for Euro. Yesterday BoC increased the interest rates by 50bp, and FED did the same with 25bp in its March meeting, the decision that most likely will be repeated in the early May meeting as well.
Not just from the fundamental point of view, technically also EURUSD still in a clear downtrend with resistance respectively at its higher band of Bollinger Bands at 1.1150, and then the key level of 1.1250. On the other hand, in the H1 and H4 charts, we can see the uptrend signals to continue, but it is mostly because of weaknesses that have been seen in the US Dolar index and not strengthening the Euro. If the dollar starts showing weakness signal, the Trend can change, but in long term, 1.10 and 1.12 still seem like a logical range.
