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20.04.202311:12 Форекс анализи и прегледи: ECB has no choice but to continue raising rates

Euro continues to rise as many politicians and ECB representatives insist on raising interest rates. With inflation remaining high, it is likely that such a scenario will happen.

Exchange Rates 20.04.2023 analysis

In fact, on Wednesday, ECB chief economist Philip Lane said that the cost of borrowing should be increased again next month unless the situation with the economy significantly. He stated that a rate hike is appropriate if the baseline scenario underlying the ECB's March macroeconomic projections persists.

Although the ECB is expected to raise rates again at its meeting on May 4, unlike previous meetings, officials are hesitant to give more assertive forecasts regarding the size of the increase. Yesterday's inflation and bank lending data will likely change their opinions.

Nevertheless, the upcoming speeches from other ECB members, led by Chairman Christine Lagarde, should help euro regain its positions. Upcoming reports on price pressures could also influence future policy decisions, as they will show whether the core price pressure, excluding items like energy and food, remains at its record high, or if a peak is approaching. The latter will most certainly lead to a decline in the indicator in the future. The credit market situation, which recently experienced stress after the collapse of one of Switzerland's largest creditors, is also an important component.

Yesterday's inflation data for March this year signaled a 6.9% increase in annual terms, while core prices jumped to 5.7%, fully in line with the forecasts. Euro's reaction to this is quite restrained, but bulls definitely have a chance to continue pushing the price up and even update the monthly highs. However, the quote has to stay above 1.0950 and take control of 1.0983 as only that will trigger a larger jump to 1.1027 and 1.1071. In the case of a decline below 1.0950, euro will fall deeper to 1.0913 and 1.0867.

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