FOREX Fundamental analysis on August 25, 2022.
On the eve of Jerome Powell's speech at the symposium in Jackson Hole, EUR/USD buyers are trying to drive the pair's quote to the parity area. But everyone knows how the games against the Fed end. In fact, whatever the head of the Federal Reserve says, the regulator will not change the course of monetary policy. This means that the bears will get deals at a better price.
No matter how much the futures market predicted the rate hike at the September FOMC meeting, the Open Market Committee will make the final decision based on inflation data for August. So it is unlikely that Jerome Powell will act as a visionary tomorrow and give a clear signal to investors to buy or sell the dollar.
As for the long-term prospects, Central banks understand that inflation will not be temporary, so rates will rise and remain at high levels for quite a long time. In this regard, the scenario of changing the course of the Fed's monetary policy to "dovish" in 2023 looks rather strange
Now buyers are playing back rumors that the ECB will raise the rate by 100 basis points at the September meeting. But here again, the ceiling of rate increases is important, which each regulator has its own. It is unlikely that the ECB will exceed 2% while the Fed plans to increase the rate to 4%. In other words, the differential of the monetary rates of Central Banks is obvious, and it is not in favor of the Old World. Capitals are looking for more favorable investment conditions, so they will choose the United States, strengthening the dollar exchange rate along the way.
Of course, the appreciation of the dollar when the euro falls adds headaches to the European authorities, since all commodities are denominated in USD, so their value increases along with the greenback. This, in turn, continues to accelerate inflation and slows down the economy.
In the medium term, the EUR/USD downtrend persists. However, most of the negative factors for the euro have already been taken into account by prices, so any positive is perceived by buyers with a bang. But, there is no reason to change the direction of the trend. According to the rules of trading from the forex levels, we will consider short positions from the resistances of 1.002 and 1.008 or at the breakdown of the support of 0.995.
This week, the focus will be on negotiations on Germany's fiscal package. The package is expected to be approved by the Bundestag on Tuesday and by the Bundesrat on Friday. It is expected that the vote will be successful, but there is a possibility of disagreement between individual representatives of the CSU/CDU, as well as possible opposition from the Free Voters of Bavaria party.In the United States, President Donald Trump announced upcoming talks with Russian President Putin on Tuesday/The purpose of the upcoming dialogue is to find ways to end the conflict in Ukraine. At the same time, data from the United States on retail sales for February will be published. Investors are closely watching to see if the recent decline in consumer confidence will have an impact on retail sales.The Fed meeting will be held on Wednesday. The Central Bank is expected to keep the interest rate at the current level. Attention will be focused on Jerome Powell's comments on the prospects for easing policy, the possible end of the quantitative tightening program (QT), and economic growth forecasts. On Thursday, the Bank of England is likely to keep the rate at 4.50%, and the Swiss National Bank (SNB) may cut the rate by 25 bps to 0.25% amid low inflation expectations.Key economic eventsGermany: approval of the fiscal packageIn Germany, the new ruling coalition has reached an agreement with the Greens on easing the Schuldenbrem budget rule and setting up an infrastructure fund. In general, the agreement corresponds to the original draft. Key concessions to the Greens include allocating 100 billion euros out of a total of 500 billion euros for environmental projects. The mechanism for excluding military spending in excess of 1% of GDP from the budget rule has also been retained, and now it includes assistance to Ukraine. The regional authorities also agreed to ease the "black zero" policy.The Eurozone: inflation indicatorsThe final inflation data in Germany, France and Spain did not bring significant surprises. While France and Spain confirmed their preliminary estimates, German inflation was revised down to 2.6% YoY from 2.8% previously. This factor will affect the overall inflation rate of the eurozone, taking into account the weight of Germany in the calculation of the index (28%).USA: Consumer sentimentThe University of Michigan recorded a significant decrease in the consumer confidence index caused by increased inflation concerns. According to preliminary data for March, inflation expectations for the year ahead rose to 4.9% from 4.3% in February. The assessment of the current situation decreased to 63.5 from 65.7 previously, and the expectations index dropped to 54.2 from 64.0. The further impact on consumption will become clear after the publication of retail sales data for February.Sweden: labor market and fiscal policyData for February showed employment growth of 0.2%, while the unemployment rate dropped to 8.9%. However, this decrease is due to a decrease in the share of the economically active population and an increase in the number of disappointed workers. The decrease in the number of temporary workers indicates a weak labor market in the next 6-9 months, with a possible recovery only by the end of the year. The ruling Moderati party has announced its intention to add 11.5 billion crowns to the spring budget package, part of which will go to defense. The final amount of defense spending is likely to be determined at the NATO summit in June.Dynamic of financial marketsStock marketsIn the absence of new threats of trade tariffs, stock markets showed growth on Friday. The Nasdaq rose 2.6%, the Russell 2000 rose 2.5%, the S&P 500 rose 2.1%, and the Dow rose 1.7%. Investors actively bought up previously affected sectors – technology, energy, banks and consumer goods. A similar trend was observed in Europe: the Stoxx 600 index gained 1.1%, while shares of banks, technology and industrial companies led the way. However, despite the growth, the overall dynamics remains weak: this is the fourth consecutive week of decline for the United States, and the second for Europe.Currency and debt marketsThe Swedish and Norwegian crowns, as well as the euro, strengthened against the US dollar and the Japanese yen in the foreign exchange market. The EUR/USD pair approached the level of 1.09, and EUR/SEK dropped to 11.00. The yield on US 10-year bonds remained at 4.30%, while German 10-year securities remained at about 2.90%.ConclusionsThis week, the key events will be the vote on the German fiscal package, negotiations between the United States and Russia, as well as decisions by central banks. The dynamics of stock markets remains unstable, while rising inflation expectations in the United States may affect the Fed's future policy. Investors continue to closely monitor macroeconomic indicators, assessing the risks to the global economy and financial markets. 
FOREX Fundamental analysis for EUR/USD on March 17, 2025The White House explains the current weakening of the US dollar, which has become the worst since 2008, as a natural correction. Scott Bessent, a spokesman for the administration, said that the dollar was significantly overvalued after the election, and the current decline is a natural process. However, the Finance Minister preferred not to delve into the reasons for this correction. The reality is that investors are losing confidence in Donald Trump's policies, especially amid trade wars and tariffs, and are beginning to shift their focus to Europe, where massive fiscal stimulus is being launched. This explains the current growth of the EUR/USD pair.Friedrich Merz, a key figure in German politics, managed to reach an agreement with the Green Party on the issue of expanding government spending. The final decision is expected on March 18, when the Bundestag will hold a vote. The markets consider this event to be even more important than the Fed meeting, as it contributes to the strengthening of the euro. A 50 basis point increase in German bond yields in March supports EUR/USD.The yield difference between German and American bonds has narrowed to 140 basis points, although three months ago this figure was 230 bps. Societe Generale predicts that by the end of 2025 the gap may decrease to 50 basis points. The last time this situation was observed was in 2013, when the EUR/USD pair was trading at 1.37.There is a growing view in the market that fiscal stimulus in Germany and the EU is not a temporary measure, as during the COVID—19 pandemic, but a long-term strategy aimed at accelerating economic growth in Europe. This increases the attractiveness of European assets and promotes capital inflows from other regions, especially from North America, where investors are disappointed with Trump's policies.If in November 2024 investors had high hopes for tax cuts and deregulation of US fiscal policy, which should have supported the S&P 500 and the dollar, then the beginning of 2025 was a cold shower for them. Trade wars and tariffs pose risks of slowing down the American economy, which can lead to serious consequences.The weakness of the economy negatively affects the stock market, and the fall in indices, in turn, puts pressure on GDP. Harvard University estimates that a 20% decline in the S&P 500 in 2025 could reduce U.S. gross domestic product by 1 percentage point. This is because the richest 10% of families in the United States are responsible for half of all consumer spending. If in 2023-2024 they actively spent against the background of market growth, now the opposite trend is observed.Prospects for the EUR/USDThe narrowing of the gap in economic growth rates between the United States and Europe, as well as the flow of capital from North America to the Old World, create the prerequisites for continued growth of the EUR/USD pair. The question is whether the current correction has ended. A break of the resistance level at 1.0910 may be a signal for new purchases. 
Inflation data for Germany, France and Spain will be published today. These figures are important indicators for forecasting the overall inflation dynamics in the eurozone next week. They can provide insight into possible inflation trends and influence market expectations regarding the future policy of the European Central Bank.The main focus in Sweden is on the February unemployment statistics (LFS). Last month, the figure rose sharply to 9.7%, which was the result of a significant influx of disappointed applicants into the active workforce. However, they were unable to find work, which led to a spike in the unemployment rate. In February, a partial rollback is expected – a decrease to 9.2%.Economic news and market eventsGeopolitics: Russian President Vladimir Putin commented on the 30-day truce proposed by the United States, expressing support for the idea, but noting the need to clarify a number of details. According to him, before the agreement can be implemented, "key issues" need to be resolved, which indicates a low probability of an early end to the conflict.USA: One of the leading Democrats of the Senate expressed support for the Republican bill aimed at preventing a government shutdown. He warned that the failure of the vote scheduled for Saturday could create conditions for the strengthening of Donald Trump's influence.Eurozone: Industrial production increased by 0.8% mom in January (0.6% expected, previous reading: -0.4%). However, the three-month rolling average (3M/3M) for the period from November 2024 to January 2025 remains 0.25% lower than the previous quarter. Despite signs of stabilization, the PMI in industry remains below 50, which indicates that the recession in the sector continues.Germany: Political differences in Berlin complicate the adoption of the budget. Despite a constructive dialogue between the parties, negotiations with the Greens on climate policy have reached an impasse, calling into question the vote scheduled for March 18.USA: Producer Price Index (PPI) for February was below forecasts at the headline level, but the underlying indicator indicates sustained pressure on prices. PPI increased by 3.2% YoY (versus 3.7% in January), while the decrease in prices for services was offset by a moderate increase in prices for goods. Initial and repeated applications for unemployment benefits decreased, indicating a stable labor market, despite concerns about layoffs in the federal sector.Sweden: The final inflation data for February confirmed the preliminary estimates. Inflation significantly exceeded expectations, while the CPIF baseline excluding energy resources was 3.0% YoY. The main contribution to the unexpected acceleration was made by the prices of food and leisure services.Stock market dynamicsStock indexes have entered a correction phase. The S&P 500 declined by 1.4%, entering the technical correction zone, while the Russell 2000 index lost 1.7%. Nasdaq continued to fall for the fourth week in a row, falling by 2%. Yesterday's dynamics of the sectoral indices were mixed: leading technology companies (MAG7) were among the outsiders along with real estate, while cyclical sectors, including raw materials and finance, showed relative stability.The general mood in the market remains uncertain, as the sell-off is not caused by a slowdown in the economy, but by a revaluation of the value of assets. Futures on American indices are showing growth today, which may lead to a technical rebound in the absence of new negative factors.Bonds and the foreign exchange marketThe weakening of risk appetite led to lower bond yields and falling stock indexes. During the week, the yield on 10-year German Bunds rose to 2.95%, but then fell back to 2.85%. Similarly, the yield on 10-year US Treasury bonds has fluctuated in the range of 4.15%-4.35%, and currently stands at 4.26%.In the foreign exchange market, the euro weakened against the dollar amid deteriorating market sentiment. The USD/SEK rally, which has been observed since the beginning of February, has stopped: the pair first fell below 10.00, but then rebounded to 10.20. 
GBP/USD analysis on March 13, 2025The British pound is showing a moderate correction against the US dollar, trading near the 1.2960 mark. The weakening of the US currency supports the upward momentum of the pound, and additional strengthening drivers come from the UK macroeconomic statistics.The key event for the pound will be tomorrow's publication of GDP data for January (09:00 GMT+2). According to forecasts, the pace of economic growth could slow down: the monthly figure is expected to be 0.1% against 0.4% in December, and the annual rate below 1.5%. Confirmation of such data may strengthen the dovish mood of the Bank of England at the upcoming meeting on March 20, which in the future will limit the growth potential of the GBP.Yesterday's change in the Bank of England's liquid financing mechanism has an additional impact: the regulator increased the loan term for banks from weekly to semi–annual, and allocated a record 2,127 trillion pounds as part of the REPO operation, the largest amount of support since 2020.The US currency partially compensates for the losses of the beginning of the week, the USDX index is consolidating near 103.50. Investors' attention is focused on the US inflation report published yesterday.February data showed a weakening of price pressure: consumer inflation slowed to 0.2% mom (the previous figure was 0.4%) and 2.8% yoy (the previous value was 3.0%). The core CPI index also dropped to 3.1% from 3.3%. These data confirm the trend towards stabilization of inflation, which in the long term supports expectations that the US Federal Reserve's interest rates will remain at 4.25–4.50% at next week's meeting.Technical analysis of GBP/USD for todayOn the daily chart, the currency pair is correcting below the resistance line of the ascending channel with the boundaries of 1.3050–1.2750.Indicators confirm the dominance of buyers:• On the Alligator indicator, fast EMAS expand the distance from the signal line, which indicates the continuation of the upward trend.• The awesome oscillator (AO) indicator forms correction bars in the positive zone, strengthening the buy signal.Trading recommendationsLong positions: after a steady breakdown of the 1.3000 level up, the target is 1.3180. The stop loss is 1.2940.Short positions: when the support breaks down to 1.2920, the target is 1.2760. The stop loss is 1.2980. 
Eurozone: fiscal package discussion and industrial productionInvestors are following the preliminary debate in the German parliament on the proposed fiscal stimulus package. At the moment, the Green Party opposes the initiative, but this is more of a tactical move to obtain concessions before the final vote scheduled for next Tuesday.The focus is also on data on industrial production in the eurozone for January. Output has continued to decline over the past two years, but with soft indicators improving, it will be important for the market to see if this affects real statistics.USA: inflation and labor market dataThe Producer Price Index (PPI) for February is expected to be published in the United States today, as well as weekly statistics on applications for unemployment benefits. Yesterday's report on the consumer price index (CPI) showed a slowdown in inflation, and now the markets will assess whether a similar trend in the PPI will follow. According to forecasts, the index growth will be 0.3% mom versus 0.4% in January.Sweden: inflation dataMarkets are expecting a detailed inflation report for February. The preliminary data turned out to be higher than forecasts: the Riksbank's target index (CPIF) was 2.9% yoy (forecast: 2.7%), the CPIF base index excluding energy resources was 3.0% yoy (forecast: 2.7%). The overall consumer price index (CPI) was fixed at 1.3% YoY (forecast: 1.1%).USA: slowing inflation and prospects for Fed policyFebruary data on inflation in the United States turned out to be lower than expected: CPI decreased to 2.8% (forecast: 2.9%, previous value: 3.0%), and the base CPI – to 3.1% (forecast: 3.2%, previous value: 3.3%). These data confirmed that the sharp increase in January was most likely temporary. Given the current trend, the Fed is likely to continue its policy of easing monetary policy, and the first rate cut may take place as early as June.EU: retaliatory measures to US tariffs and Lagarde's speechThe European Commission announced the introduction of countermeasures against US duties on steel and metals, which came into force the day before. The EU measures are aimed at compensating for the economic effect of US tariffs in a 1:1 ratio, but can be canceled if agreements are reached. So far, the impact of these trade restrictions on economic growth and inflation is estimated to be negligible, as they affect only about 5% of European exports to the United States.The speech by ECB President Christine Lagarde did not give clear signals regarding the upcoming meeting in April. In the context of geopolitical instability and changes in fiscal policy, the ECB intends to remain flexible in its decisions. Lagarde stressed the risk that inflation volatility could lead to a sustained increase due to wage adjustments, which requires a cautious approach to rates. At the moment, the markets estimate the probability of a rate cut in April at 45%.Canada: rate cut and response to trade barriersThe Bank of Canada, as expected, lowered its key rate by 25 bps to 2.75%. The market reaction was restrained, as the main focus is on the uncertainty surrounding the US tariffs. In response to the US duties, Canada promptly retaliated against about $21 billion worth of imports from the United States, calling Washington's actions "unfair and unjustified."Stock marketAgainst the background of the correction in the United States, the main indexes partially recovered: the S&P 500 gained 0.5%, the Nasdaq - 1.2%. The European market also closed in positive territory (Stoxx 600 +0.8%), however, there is a rotation of assets: investors leave the defensive sectors (consumer goods -2.5%) and switch back to technology stocks. However, against the background of new economic data, futures on major indexes indicate a deterioration in market sentiment.Bonds and currenciesThe yield of American bonds is growing compared to European ones: The spread on the 10-year US-Bund widened by 5 bps to 143 bps. A similar trend is observed for 2-year securities. The EUR/USD pair is trading steadily near 1.09.The Bank of Canada's decision to lower the rate did not cause sharp fluctuations in the foreign exchange market. EUR/NOK declined during trading on Wednesday and is near 11.57, while the markets estimate the probability of a rate cut in Norway in March at about 50%. The EUR/SEK pair initially rose above 11.01, but then adjusted back below 11.00. 
USD/JPY analysis on March 13, 2025During Thursday's Asian trading, USD/JPY corrects positions and tests the 147.85 level for a downward breakout. Market participants are waiting for new fundamental factors that may set the direction for further movement.Producer Price Index (PPI) data for February will be released in the United States at 14:30 (GMT+2). According to forecasts, the annual rate may slow down from 3.5% to 3.3%, and the monthly rate from 0.4% to 0.3%. The core PPI index, which excludes food and energy resources, is likely to remain at 3.6% year-on-year and 0.3% month-on-month.In addition, the market is awaiting the publication of statistics on applications for unemployment benefits in the United States. According to expectations, the number of initial requests for the week of March 7 will increase from 221 thousand to 225 thousand, and repeat requests (as of February 28) — from 1,897 million to 1,900 million. On Friday at 16:00 (GMT+2), the consumer confidence index from the University of Michigan will be released, which is projected to decrease from 64.7 to 63.4 points, which may affect investor sentiment.Investors continue to analyze data on Japan's economic growth. Updated GDP statistics for the fourth quarter of 2024 showed that the economy grew by only 0.6% instead of the expected 0.7%, and in annual terms — by 2.2% instead of 2.8%. The slowdown in growth complicates the task of the Bank of Japan, which is considering a gradual curtailment of soft monetary policy.USD/JPY technical analysis for todayThe Bollinger indicator on the daily chart is trying to reach a neutral position. The MACD continues to grow and maintains a buy signal. Stochastic is moving up more actively and is located in the middle zone of the indicator.Trading recommendationsSales may be relevant after a confident breakdown down to 147.00. The target will be 145.00. Stop loss — 148.00.If growth resumes and gains above 148.55, purchases with a target level of 150.00 are possible. Stop loss is 147.90. 
In Thursday's Asian session, USD/CHF shows mixed dynamics, consolidating near the level of 0.8815. Market activity remains moderate, despite the release of important data on inflation in the United States on Wednesday.The annual consumer price index (CPI) slowed to 2.8% in February from 3.0% in January, which was lower than the forecast of 2.9%. On a monthly basis, CPI growth was 0.2% against 0.5% previously, with expectations of 0.3%. The core index, which excludes food and energy, also slowed: the annual rate decreased from 3.3% to 3.1%, and the monthly index decreased from 0.4% to 0.2%.Despite this, market expectations regarding the Fed's monetary policy remain stable. Analysts still expect two or three key rate cuts in 2025, starting in June.Today at 14:30 (GMT+2), the market's attention will be focused on data on the producer price index (PPI) in the United States. The annual rate is expected to slow down from 3.5% to 3.3%, and the monthly rate from 0.4% to 0.3%. The base PPI, excluding food and energy, is likely to remain at the same levels: 3.6% in annual terms and 0.3% in monthly terms.Investors will also keep an eye on statistics on applications for unemployment benefits. It is predicted that the number of initial applications for the week of March 7 will increase from 221.0 thousand to 225.0 thousand, and repeat applications (for the week of February 28) — from 1.897 million to 1.900 million.On Friday at 16:00 (GMT+2), the March data on the consumer confidence index from the University of Michigan will be published. The indicator is expected to decrease from 64.7 to 63.4 points.Switzerland will publish February data on producer and import price indices at 09:30 (GMT+2). The monthly index is expected to grow slightly from 0.1% to 0.2%, while the annual index is likely to remain at -0.3%. These data are unlikely to have a significant impact on the monetary policy of the Swiss National Bank.USD/CHF technical analysis for todayOn the USD/CHF daily chart, the Bollinger Band indicator indicates a continuation of the downtrend. The MACD indicator is trying to turn up, forming a weak buy signal. Stochastic shows more confident growth, being in the middle part of the workspace.Trading recommendations- Short positions: can be considered after a confident breakdown down to the level of 0.8800 with a target of 0.8758. The stop loss is 0.8827.- A rebound from the 0.8800 level as support, followed by an upward breakout of 0.8827, may be a signal for purchases with a target of 0.8875. The stop loss is 0.8800. 
FOREX Fundamental analysis for EUR/USD on March 13, 2025Donald Trump intends to respond to the actions of the European Union, which imposed duties on American goods worth €26 billion in response to US tariffs on steel and aluminum. The US president believes that the EU was created to benefit at the expense of the United States, and is ready to act on the principle of "an eye for an eye." Despite the growing tension, the EUR/USD pair has not yet shown a significant reaction to these events.The sharp rise in the euro against the dollar has forced financial institutions to revise their forecasts. For example, UBS, which previously expected parity in the EUR/USD pair, now forecasts growth to 1.12 by the end of the year. Among the key factors are Trump's tolerance for a possible recession in the United States, progress in Europe's fiscal policy, and worsening trade relations between the United States and Canada.However, Nordea adheres to the opposite point of view, expecting the pair to decline to 1.04 within three months. The bank's analysts believe that trade wars and fiscal incentives in the United States can support the American economy, while tariffs will slow down the growth of its competitors.US inflation data for February showed a slowdown in consumer price growth to 0.2% in monthly terms. This has increased expectations that the Fed may resume its rate-cutting cycle as early as May. The news put pressure on the dollar. However, the market is starting to take into account that the tariffs imposed may accelerate the growth of the CPI and PCE indices in the future, which will change the current disinflationary trend.Donald Trump's policies continue to bring uncertainty to the markets. If investors tried to predict which tariffs would be lifted during his first term, they are now preparing for short-term difficulties, which, according to the administration, are necessary to strengthen the US position.Although markets interpret these difficulties as harbingers of a recession, it is too early to talk about a downturn in the US economy. Excessive pessimism is embedded in the current dollar quotes, while optimism about the euro related to fiscal incentives in Europe may be overestimated. It will take time to implement a positive scenario for the euro, especially given the need to amend the German Constitution.Perspectives and recommendationsGiven the growing risks of a trade war and overestimated optimism about the euro, the correction potential of the EUR/USD pair looks significant. This should be taken into account in forex trading strategies. It is recommended to consider the possibility of strengthening short positions opened earlier from the level of 1,089. 1.0825 and 1.0715 can be considered as initial targets.