empty
 
 
23.03.2023 12:38 PM
ECB stands firm on its position

Euro rose as market players were pleased over the Fed's interest rate decision yesterday and statements made by ECB officials. The latter is increasingly convinced that the eurozone banking system has withstood the financial turmoil, so they continued to raise interest rates.

Most of the officials who spoke earlier this week believe that a 50 basis point rate hike in the eurozone is the right thing to do. Thus, the ECB remained aggressive despite the global market volatility caused by the banking turmoil. Other central banks are claiming the need to "loosen the grip", such as the Fed, which raised rates by only 0.25%. The move led to euro hitting 1.0900.

This image is no longer relevant

It seems that ECB officials are more worried about insurmountable inflation than the damage to economic growth from the recent turmoil. They also looked anxiously to the US for signs of further problems that could consume the European banking sector entirely. But since the bankruptcy and takeover of Credit Suisse is not similar to what happened to three regional banks in the US, the ECB continued to press on with an intensified fight against inflation.

ECB President Christine Lagarde also insisted that if core inflation continues to remain high, they will have more reason to raise rates further. "I made it clear that there is no trade-off between price stability and financial stability," she reiterated. "We see no clear evidence that core inflation is trending downwards," she added.

Clearly, despite the problems in the banking sector, financial markets in the eurozone continue to function and government bond markets show no signs of fragmentation. Euro also remains resilient and bank stocks have regained some of the losses from last week.

Bundesbank President Joachim Nagel recently said in an interview that once the ECB stops growing, it will have to resist calls to cut rates as this would allow inflation to flare up again. "If we want to tame inflation, we will have to be even more stubborn," he said.

In terms of the forex market, euro bulls still have all the chances to renew the March highs, but to do this they need to hold the quote above the support level of 1.0870. That will allow EUR/USD to rise beyond 1.0930 and head towards 1.0965 and 1.1000. In case of a decline, the pair will fall below 1.0880, and then go to 1.0840 or 1.0800.

In GBP/USD, bulls are ready to keep storming the monthly highs, but they have to keep the quote above 1.2280 and breakthrough 1.2330. That will push the pair to 1.2390 and 1.2450. Should bears take control of 1.2280, a slide towards 1.2220 and 1.2180 is possible.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2024
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $4000 more!
    In July we raffle $4000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Can't speak right now?
Ask your question in the chat.
Widget callback