First, a new perspective on the European currency:
Yesterday, European Central Bank Governing Council member Yannis Stournaras said interest-rate increases may end this year, but warned that they mustn’t cause an economic downturn.
“It’s important to be careful in our next steps, which should be gradual and measured,” Stournaras told at Economist event on Monday.
Stournaras also said:
“We shouldn’t underestimate the risk that the effects of the monetary-policy measures we’ve already taken will prove particularly strong when fully deployed”
“We are close to the end of the upward interest-rate cycle, though we’re not quite there yet”
“We’re called to consider what level of interest rates is appropriate and for how long they should be maintained in order to tame inflation”
The ECB raised borrowing costs by another quarter-point last week as it still forecasts inflation above its 2% goal in 2025.
And what are the prospects for further monetary policy in the U.S.?
Most Fed officials agree further tightening is needed to contain price pressures.
Powell emphasized inflation reduction several times and noted that Fed officials and private economists were surprised at how long inflation remained high. The FOMC raised its outlook on the economic growth and the labor market, but now expects unemployment to rise to 4.5% next year.
The statement sent a strong signal that the committee will resume hikes as soon as July. Powell in his press conference said a large majority of the FOMC is expecting additional tightening.
In case this difference in sentiment continues to grow, the more clear will be the trend of EURUSD weakening.
The final recommendation for this scenario would be to sell EURUSD with a long-term target near the level of 1.0000.
The loss is fixed at 1.5000
This content is for informational purposes only and is not intended to be investing advice.
