During the Asian session, the euro weakened against the US dollar.
During Asian trade, the British pound weakened against the dollar.
The European Central Bank has become a hawk with several policymakers who see the need for urgent steps towards policy normalization.
EURUSD chart analysis
During the Asian session, the euro weakened against the US dollar. Uncertainty before the French presidential election burdens the euro on top of the EU’s decision to further worsen relations with Russia, which will leave a bad mark on the economic activity of the eurozone. The US currency is in a big rush towards all major currencies. On Tuesday, Lael Brajnar, the Fed’s second wife, said that she would advocate for a drastic reduction in the US Federal Reserve’s balance sheet at a meeting in May. For the bearish option, we need a continuation of the current negative consolidation, a pullback below 1.08500 and testing 1.08000 of this year’s support. If the dollar continues to strengthen due to geopolitical events, then we can expect the euro to continue to weaken and new lower levels to visit on the chart. We first need to go back above the 1.09000 and MA20 moving averages for the bullish option. Then, our next target is the 1.10000 level. We have a lot of resistance on that level, such as the resistance line, MA50 and MA200 moving average. The EURUSD break above would take us back to the previous March consolidation. After that, the next target is 1.11000, then the zone around 1.12000 and the formation of a new higher high.
GBPUSD chart analysis
During Asian trade, the British pound weakened against the dollar. The British embargo on imports of Russian coal and oil prevails on the pound. The US currency is in a big rush, and the dollar index has risen to almost 100.00 and dominates all major currencies. The pound is exchanged for 1.30435 dollars, weakening the British currency by 0.23% since the beginning of trading tonight. For the bearish option, we need a continuation of this negative consolidation that began on March 23. Pair fell below the previous low to 1.30500. We are now looking at the March lower low at 1.30000, and this is our low this year as well. If GBPUSD falls below 1.30000, then the space opens up to 1.29500 and then 1.29000. For the bullish option, we need GBPUSD growth above 1.31000. At that level, our additional resistances are in the upper trend line, MA20 and MA50 moving averages. The break above climbs us to 1.32000 levels, and there awaits us MA200 moving average. Our next bullish target is the previous high at 1.33000.
ECB and hawkish monetary policy in the coming period
The European Central Bank has become a hawk with several policymakers who see the need for urgent steps towards policy normalization. As eurozone inflation has set new highs amid rising energy prices, the minutes of the last session on setting rates on Thursday showed.
“A large number of members believed that the current high level of inflation and its persistence require urgent further steps towards the normalization of monetary policy.” There were also concerns that the latest staff projections may underestimate the persistence of inflation above the target.
Inflation in the eurozone rose in March and set a new record of 7.5 % after the Russian invasion of Ukraine raised energy prices. The main inflation, which excludes the prices of energy, food, alcohol and tobacco, rose to 3.0 %.
The argument that all three preconditions for raising interest rates have either been met or are very close to being met is contradicted by the view that the persistence of rising indicators could be temporary and that uncertainty is high in the current situation.
Policymakers felt it was essential to take action at this meeting to reduce scheduled purchases under the asset purchase program, or APP, over the coming quarters to open up options for future interest rate decisions.
Some members preferred to set a firm end date for APP net purchases over the summer, opening the way for a possible rate increase in the third quarter of this year in light of the deteriorating inflation outlook.
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