FOREX Fundamental analysis for EURUSD on March 15
The Fed is in a bad predicament. The regulator has to continue the fight against inflation, which does not intend to give up and at the same time ensure the stability of the financial sector. Will the Fed's refusal to further tighten monetary policy help American banks? It's a tough question. A week ago, few doubted that the FOMC would raise the rate by 50 basis points in March.
At the same time, the report on inflation in the USA, published the day before, shows that the Fed cannot afford to switch to a wait-and-see attitude. On an annualized basis, consumer price growth slowed from 6.4% to 6.0% and core inflation from 5.6% to 5.5%, which matched Bloomberg's forecasts. However, a 0.5% (m/m) rise in the core rate to a five-month high suggests that inflationary pressures remain.
Yesterday's statistics combined with problems in the U.S. banking sector allowed EURUSD to rise above 1.0705.
Dynamics of inflation in the USA
In other words, the central bank has to continue its monetary easing in line with its own plans and objectives, so the 80% probability of a 25 basis points rate hike in March looks quite reasonable.
At the same time there is a clear increase of interest in risky assets in forex trading, which is a factor supporting EURUSD.
US stock indices dynamics
Moreover, the problems in the US financial sector cannot influence the European Central Bank's determination to proceed to toughening of the monetary policy and to raise the rate by 50 basis points at once in March. In this regard the press-conference held by Christine Lagarde from which investors will try to understand the perspectives of the European regulator's monetary policy is of particular interest.
Sellers of EURUSD did not manage to drop below 1.0705, and the idea of the uptrend continued. At the same time, the "bulls" are facing important resistances at 1.076 and 1.08, which can slow down further strengthening.