Fundamental analysis of FOREX on June 29, 2022.
It is difficult to say which of the Central Banks has chosen the most effective position. The Fed, which for a long time denied the problems of rising inflation, and then, catching up, began to aggressively raise rates. Or the ECB, where no one is in a hurry. During yesterday's speech, Christine Lagarde emphasized gradualism instead of decisiveness, which sent the EUR/USD quotes to the peak.
Of course, the actions of the monetary authorities should be one step ahead of the market and not allow any shocks. Alas, the Fed has made serious mistakes by misjudging the consequences of inflationary growth. Now, the active tightening of the monetary policy of the regulator, according to a number of analysts, may lead to a downturn in the economy of the United States.
And in the FOMC itself, not all members of the Committee advocate high rates of monetary restriction. The head of the Federal Reserve Bank of New York, John Williams, believes that the issue of raising rates by 50 or 75 basis points will be discussed at the July meeting. This is at a time when the market is increasing the probability of an increase by 1.00% at once. Isn't the official's speech a subtle hint of the regulator's departure from the previous plan?
Of course, the Central Bank's plans are directly related to economic indicators. And they have not been pleasing lately. First, the consumer sentiment index from the University of Michigan showed the lowest mark in history. Then the consumer confidence index from the Conference Board collapsed. Such a synchronous collapse of indicators indicates a serious reduction in household spending, and, as a result, a slowdown in economic growth.
Rumors of a possible recession reduce the profitability of treasuries and negatively affect the USD exchange rate. But the EUR/USD bulls did not have a swift attack either, as Christine Lagarde's speech in Portugal disappointed buyers of the single currency. The head of the ECB said that the regulator plans to raise the rate by only 25 basis points in July, and possibly by 50 bps in September. An even greater acceleration of inflation may add to the Central Bank's determination. Investors, analyzing the latest Eurozone reports, probably expected tougher actions from the Bank. Not getting what they expected, they began to get rid of the single currency.
Buyers of EUR/USD still have a chance to recoup on the release of inflation statistics for the Eurozone countries and the Euroblock as a whole. However, they are unlikely to achieve great success, since the ECB does not plan to deviate from its plans. In this regard, we believe that the most acceptable forex trading strategy for EUR/USD will be sales on growth to 1.048 and 1.0455.