Eurozone inflation: We believe the issue's roots were building up before the war, and some are saying it was groundwork set by the ECB
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Is the inflation related only to the war in Ukraine? What's ahead of Bitcoin? Let's see what Joe Jeffrries (Market Analyst at Eightcap) has in mind.
FXMAG.COM: Do you think the next major drop of the Eurozone inflation will take place after any real sign of ceasefire in the eastern Europe?
Joe Jeffriess: Interesting question. While yes, the war in eastern Europe contributed to the current inflation problems, it could be seen as icing on the cake. We believe the issue's roots were building up before the war, and some are saying it was groundwork set by the ECB over the last ten years that led to the inflation issue.
Focusing on the last three years, the pandemic looks to be one of the main drivers. Supply chains and economies stopped and added to that massive government-led stimulus. While supply chains remained stressed, spending increased, and restrictions stopped, supply wasn't ready for the demand influx. This was definitely a unique situation combined with the pandemic. We also had record-low rates supporting easier borrowing.
So if we do see a ceasefire, will that stop the current sanctions? We don't think so. Oil, one of the key short-term drivers of cost increase after the start of the war, has dropped back to $78. That's a level last seen in January 2022, a price level below the spike seen once the conflict started. We feel it's not really a factor now. Ukrainian wheat production and export is another factor, but will it return to pre-war levels again after a ceasefire? We don't think so.
Based on the above, we don't think a ceasefire will greatly impact inflation in the short term. Supply chains, spending, and ECB policy will continue to dictate the situation.
FXMAG.COM: Bitcoin has been gaining for 4 weeks straight, but it's a tough week ahead. How high could be price of Bitcoin on Friday evening?
Our view continues to see its fortunes in two main areas.
US inflation and the USD look to have a big impact on the coin as it closely tracked the Nasdaq for a considerable period. As inflation soared and equities fell, we saw BTC follow lower. As the Fed's message started to soften, things are looking rosier for Bitcoin. Since hitting its 2022 low, just over 50% has been added to this year's high.
Price also looks to be confirming a weekly chart breakout from an ending diagonal pattern. We remain bullish on Bitcoin. As long as Fed policy continues to veer toward the dovish side and the inflation picture continues to improve, we will remain more on the bull side of Bitcoin.
How high will it be Friday evening? If I could tell you that, I don't think I'd be working for anyone right now! Being serious, if 22,500 support remains in play, and the Feds statement supports lower rate rises and continues to confirm inflation is easing, we feel it could try to retest this year's high at 23,900 or surpass it.
Finally, industry chaos is the second factor; hopefully, we have seen the last of the chaotic surprises. If the industry can remain stable and continue to strengthen, this could put confidence back into the public and bring new money back to the market.
