Euro strengthens despite dovish Lagarde comments.
20 January 2022
Volatility has returned to financial markets as traders are trying to assess how fast the Fed will hike rates, along with the continuous dovishness coming from Europe.
Earlier on Thursday, European Central Bank President Christine Lagarde told the virtual World Economic Forum that the conditions that are forcing the Federal Reserve to raise interest rates are not present in the Eurozone, where wages are rising much more slowly, and that over half of the inflation being currently reported is due to energy prices, and thus likely to reverse.
In contrast, German PPI rose 5% month-on-month in December (versus 0.8% forecast), while the yearly gauge rocketed to 24.2%, well above 19.4% expected. Later today, the revisions of EU CPI are due.
Nevertheless, the EURUSD pair traded higher today, despite the considerable divergence in monetary policies. However, the MACD indicator on the daily chart is about to send a bearish signal for the first time since November, likely undermining the euro over the following days.
During the US session, existing home sales for December are seen slowing somewhat. In addition, jobless claims will also be released, along with the Philadelphia fed manufacturing survey for January.
From other news, US stock markets fell notably yesterday, pushing the Nasdaq 100 index to its 200-day moving average (15,000 USD) for the first time in nearly two years.
Precious metals soared unexpectedly Wednesday, as silver jumped above 24 USD, while gold managed to get above strong resistance of 1,840 USD. On the other hand, US real yields continue to move higher, somewhat diverging from metals prices.