ECB’s Christine Lagarde Eased Fears (EUR/USD, EUR/CHF), Expectations Of A More Hawkish BoE Strengthen (EUR/GBP, GBP/USD)
Aa
Share
Summary:
- President Joe Biden announced he is considering a gas tax holiday.
- Markets expect a more hawkish BoE, thus offering the pound sterling support.
- CHF is supported by the SNB's hawkish attitude.
Read next: BoE’s Dr Catherine L Mann Speaks
EUR/USD currency pair
The market is reflecting bullish signals for this currency pair. US President Joe Biden has announced that he may be considering imposing a gas tax holiday in an attempt to ease inflationary pressure on the US consumer. This looser fiscal policy move could help the Monetary policy tightening moves by the Federal Reserve by adding more flexibility and optionality in its fight against inflation. Theoretically speaking, looser fiscal policy encourages more foreign investment, and thus a higher US Dollar demand. This mixed with a hawkish Federal Reserve could give an extra boost to the US Dollar if the tax cut is approved.
During her speech yesterday, European Central Bank (ECB) president Christine Lagarde managed to ease fears via her statement around the ECB’s proactive fight against fragmentation, thereby offering the Euro support.
EUR/USD Price Chart
BoE expected to accelerate their interest rate hiking path
The market is reflecting bearish signals for this currency pair. Analysts at Goldman Sachs and Deutsche Bank say they expect the Bank of England (BoE) to accelerate the rate in which they will raise interest rates. The BoE indicated they would be more inclined to take a more stern stance on inflation, even at the expense of growth. Therefore, giving the markets expectation of a more hawkish BoE, and offering the pound sterling support.
EUR/GBP Price Chart
SNB’s move to raise interest rates offers CHF support
The market is reflecting bearish signals for this currency pair. Despite European Central Bank’s (ECB) Christine Lagarde easing fears around fragmentation, the Swiss Franc is still showing strength against the Euro. Last week the Swiss National Bank (SNB) surprised the markets with a 50 basis point rate hike in its interest rates, which offered the safe-haven currency support. The Swiss Franc was the best performing currency last week.
EUR/CHF Price Chart
Looming recessions and slowing economies
The market is reflecting bullish signals for this currency pair. The pound sterling was edging higher during early trading on Tuesday despite negatives hanging over the GBP. On Wednesday, the UK is expected to release headline inflation data, which is expected to come in at 9.1%, which may even come in higher. In addition, the fears of a slowing UK economy and a global recession are only 2 of the factors that are weighing on this currency pair and on many other foreign exchange pairs.
GBP/USD Price Chart
Sources: dailyfx.com, finance.yahoo.com, poundsterlinglive.com
