EURUSD has to fall after the US reported on the Consumer Price Index. The major currency pair is back to falling. The current quote for the instrument is 1.0976. The risk appetite dropped yesterday after the US reported on inflation in February. The indicator showed 7.9% y/y, the highest reading in 40 years. What does it mean? First of all, the US Fed has another reason to tighten its monetary policy ahead of the schedule.
Earlier, there were rumours of four rate hikes in 2022, and now investors are discussing five, six, or even more. Moreover, there are doubts that the regulator will be able to “beat” non-monetary inflation with monetary instruments. At the same time, the American economy is looking quite stable to “survive” the rate hike with ease.
The European Central Bank had a meeting yesterday, and the tone was more “hawkish” than expected. The regulator said that the APP could end in the third quarter of 2022, which means that there will be opportunities for raising the benchmark interest rate. It’s good news because inflation boost becomes a real problem, more serious than potential economic losses due to geopolitical tensions.
Can the ECB raise the rate during its July meeting? After yesterday’s session, this probability went up pretty much. However, the European regulator will make all decisions based on geopolitics. As long as this factor is far away from stability, it’s difficult to imagine the EUR going up.
