The European currency is trading above 1.10. According to data released yesterday, inflation in the Eurozone rose to 7% in April from 6.9% in March. Tomorrow the meeting of the European Central Bank (ECB) on monetary policy will take place. Most experts believe that the regulator will increase interest rates by 25 basis points to 3.75%. However, many analysts allow the possibility of a 50 basis point rate hike.
The likelihood of this increased significantly after inflation data confirmed that inflation pressures in the Eurozone continue to increase. Market participants believe that the current rate increase will not be the last and by the end of the year the rate may exceed 4%. That said, we recommend holding long positions on the euro.
BUY STOP 1.1050/TP 1.1150/SL 1.1020
DXY
The US dollar is edging lower. The Fed will meet today and may increase its key rate by 25 basis points. Market participants believe that this decision may trigger a further decline in the dollar, as it will increase uncertainty in the banking sector and put additional pressure on the economy. In other words, further tightening of monetary policy by the regulator may push the US economy, which is already showing signs of an economic slowdown, into recession. Against this backdrop, we recommend shorting the US dollar index.
SELL STOP 101.30/TP 100.00/SL 101.70
AUD/USD
The AUD/USD pair is trading at 0.6650. Yesterday, the Aussie strengthened significantly after the Reserve Bank of Australia (RBA) raised the interest rate by 25 basis points from 3.60% to 3.85%, which came as a surprise to most experts who expected the value to remain at the same level. Officials noted that inflation in the country remains too high (7%), and allowed further policy tightening to bring the price growth to a 2% target range. Representatives of the bank expect that this may take several years. Given the above, the growth of the Australian currency may continue.
BUY STOP 0.6700/TP 0.6800/SL 0.6670