The entire world has heard by now that the Queen has died and that her son Charles will be proclaimed King of the United Kingdom.
Nevertheless, traders in the financial trading markets are interested in one thing – how does this affect the financial markets? Investors continue to evaluate the markets, but it seems that there are no direct effects other than bank holidays for mourning which would result in markets closing.
Traders are not looking only into how the UK’s mourning will affect financial markets. One of the main developments in the currency and equity markets is related to the European Central Bank’s and Chairman Powell’s speech.
Both took place yesterday afternoon and triggered strong price movements throughout various markets.
EUR/USD – Technical View
The price of the ended the day slightly higher than the market open but has seen strong price movements throughout this morning’s Asian session. So, what is driving the price?
At first, the price declined after the of the 75 basis point rate increase. This was partly because most investors were already pricing the rate hike into the asset and potentially cashing in before strong price volatility.
With regards to the rate alteration, there were no shocks. However, the price saw a strong bullish price movement after ECB President Lagarde’s press conference.
The press conference resulted in the price of the EUR/USD pair increasing by 135 PIPs (1.35%). Most investors were expecting a 75 basis point hike but wanted clarification on whether the Central Bank would continue to hike interest rates throughout the rest of the year.
President Lagarde advised that the hike was not an isolated event and that rates would continue to rise within the Eurozone. Interest rate hikes are known to support the currency, but of course, other factors also play a part.
In addition to the above, Christine Legarde indicated that future rate hikes would not be as high as 0.75%. According to her, “a 75 basis point hike is not the norm”. So, traders are now wondering whether the ECB will hike the rates by 0.25% or 0.50%.
Also, will the ECB continue to hike the rates month-on-month as the Fed has? Or will the hikes come later in the year? These factors will likely influence the exchange rate of EUR/USD.
As far as the US Dollar is concerned, investors were intrigued by the Fed’s speech yesterday afternoon. The Fed remained hawkish again, indicating a 75 basis point hike but more importantly, Powell advised that the interest rates would not ease any time soon.
Some analysts believed the rates would decline early next year, but the Chairman did not react positively to such ideas. Certain members of the Federal Open Market Committee (FOMC), such as President Mester, have indicated that they would like to see interest rates higher than 4% by December.
Crude Oil – Technical View
The price of has declined by 4.40% this week. What triggered the decline? China is the world’s largest crude oil buyer, making up a massive portion of the demand.
Lockdowns and poor economic data from the country have resulted in fears that the level of demand for the asset will continue to decline. In addition, certain moves on OPEC’s side have indicated that they expect the demand to decline going forward.
Will Oil Continue To Decline?
China released more economic data this morning. Once again, it’s not good news for China. , which account for a big part of inflation, are much lower than expected and have declined to +2.8%.
This is the lowest they’ve been so far this year, and economists have advised that it is due to reduced demand. Barclay’s investments department has downgraded economic growth for China. Does this have the potential to drive the price lower?
Nonetheless, bullish price movement should be monitored, and traders consider price action. Lower inflation and economic growth levels can trigger the Chinese government to input stimulation plans which could potentially boost figures.
