Will ECB start rate hike at March meeting?
While European shares trading higher for a second day, the US bond yields on the 10-year Treasury note bounced back to the clear bullish trend and last seen at 1.976%. Today and so far, STOXX 600 gained 0.90% higher and extended its advance, bouncing off a support line. German DAX gaining 1%, and France's CAC-40 is up by 1.3%.
This week, at the beginning of the week we had the purchasing manager index numbers much better than expected almost in all Eurozone members. After the mentioned great economic data, today we had the inflation numbers. According to the published data, Eurozone inflation stood higher in January as well, with the annual CPI figure confirmed at 5.1%, a gain of 0.3% on the month.
These are in line with improving economic data, increasing the pressure on the European Central Bank to review its monetary policy that still includes a bond-buying program. Therefore, now the focus will be on the March ECB meeting. Some ECB members already started to support the less dovish policy or better saying going towards Hawkish policy, including Austria's central bank's governor. Now, more than any other time we are waiting to see the announcement of ending the bond purchases in the third quarter, to open the door for a rate hike before year-end. This is while we can hear more hawkish whispers as well. ECB policymaker, Robert Holzmann in a press interview told that the central bank could begin increasing interest rates even before ending its asset purchasing scheme.
Before going to check the technical chart and see what we can expect from the EURUSD, need to mention the EU member's reaction to the Russia-Ukraine tensions. 27 EU countries have unanimously passed sanctions on 351 Russian Duma members and 27 entities and individuals, including political decision-makers and the banks that fund them. The Ukraine crisis has also forced some NATO and non-NATO countries such as Britain, Denmark, and Sweden to step up military exercises. On the Russian side, the latest news pointed out that the personnel of the diplomatic missions in Ukraine have been evacuated by the Russian Ministry of Foreign Affairs, because "Ukraine violated its obligations under the Vienna Convention on Consular Relations" and "Russian diplomats have been repeatedly attacked".
On the US Dollar side, it is also increasing, as its safe-haven demand is increasing. However, this demand can decrease, if Russian pauses the military advance, which is so likely. So far, sanctions that we had will not hit the Russian economy significantly, and most will be used as a deterrent to prevent further attacks on other Ukrainian territories. Putin does not seem like a stupid person to continue this tension and change the current winning situation with a loser. Therefore, tensions will be decreasing, which means US dollar demand also must decrease, and Euro can take the advantage of that.
From the technical point of view, from the beginning of February, market volume as you can see in the bellow daily chart of EURUSD, the market volume moves above the 20 DMA and we can read that as a positive signal for bulls in the chart. In the short and mid-term charts, bears still have a better position and technically, it remains bearish.
From the technical point of view, from the beginning of February, market volume as you can see in the bellow daily chart of EURUSD, the market volume moves above the 20 DMA, and we can read that as a positive signal for bulls in the chart. In the short and mid-term charts, bears still have a better position and technically it remains bearish.
