FOREX Fundamental Analysis on September 15, 2023
The European Central Bank went for a rate hike to 4.0%, which was a collapse for the single currency. Investors decided that the regulator has ended the monetary restriction cycle while the Fed continues to keep the intrigue alive. EUR/USD moved into a sharp decline.
Despite the fact that some members of the ECB Governing Council felt a pause was necessary, the rate was raised by a majority vote. Christine Lagarde notes that the tightening of financial conditions may continue, and there is no question of a rate cut. But markets think differently.
The derivatives market believes that next year the ECB will cut the rate by 75 basis points, and the first act of monetary expansion will take place in June, not in July, as previously thought. It is clear that investors have assessed the deterioration of economic forecasts of the Eurozone and believe that in the Old World recession can begin much faster than in the New World, therefore, the regulator will have to go to the easing of monetary policy.
Once again worked out the classic principle of currency trading on Forex: "buy on rumors, sell on facts". According to HSBC analysts, EUR/USD will fall to 1.02 by the end of the year.
There is certainly logic in this reasoning. In any case, economic reports give an accurate assessment of the state of affairs in the U.S. and Eurozone. According to the forecast of JP Morgan, the US GDP will grow by 3.5% in the third quarter. This means that the Fed can afford to continue the monetary restriction cycle, unlike the ECB.
EUR/USD continues its bearish hike. Forex trading strategies with selling the pair from upward pullbacks give a good result. We continue to build up short positions with a focus on 1.059 and 1.051.