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EUR/USD Volatility to Swell? Ukrainian War Data, GDP and CPI Ahead – By ASC


RUSSIA -UKRAINE WAR, CPI DATA, GDP DATA, EUR/USD – CONVERSATION:

  • EUR/USD volatility is likely to increase from the Eurozone cascade and US data
  • The Russo-Ukrainian war continues to shake markets, straining international relations
  • The EUR/USD technical outlook is declining as demand for heaven continues to rise

The US dollar is likely to rise sharply next week as risk aversion across markets grips investors amid the ongoing Russia-Ukraine war and hawkish comments from the Fed. The anti-risk Japanese Yen and the Swiss Franc are also likely to get a higher boost, although the Greenback’s unrivaled liquidity may provide an advantage over its counterpart.

Last week, the market fell following comments from the Fed hinting at a strong hawkish trend despite many influences driving volatility. On Monday, the S&P 500 gap was lower, even as it ended the day in the green. However, risk aversion permeated across asset classes and saw the US Dollar, Swiss Franc and Japanese Yen close higher against most G-10 currencies.

S&P 500 Index – Daily Chart

Source: TradingView

Commodity -linked currencies such as the Swedish Krona, the Norwegian Krone, as well as the Australian and New Zealand Dollars were severely affected. Investors may see these dynamics worsen in the coming weeks, but what are the biggest market movers?

FRENCH ELECTION RESULTS, MARKET REACTIONS

The market reaction to the victory of French President Emmanuel Macron was somewhat muted. Euro and regional equity markets did not show significant excitement a day after the results were announced. Traders are likely to set the price in a win for their incumbents, and with that political risk gone, European stocks are now refocusing on macroeconomic concerns (such as the Fed).

RUSSIA-UKRAINE UPDATE

Meanwhile in Ukraine, the party the strategic port city of Mariupol now mostly under Russian military control. News now focuses on the Azovstal metalworking plant. Reports suggest the Kremlin may launch a new offensive focused on seizing industrial complexes from the Ukrainian military.

Map Showing Russia’s Progress to Ukraine

EUR/USD Volatility to Swell?  Ukrainian War Data, GDP and CPI Ahead

Source: BBC News

On Monday, U.S. Defense Secretary Lloyd Austin said he hoped to see a “weak Russia” following Moscow’s actions against its Slavic neighbor. While Washington has not expressed a desire to send its own troops or NATO, policymakers have supplied weapons to Kyiv and promised to continue that support, which has deeply disappointed Moscow.

For more updates on geopolitical risks, follow me on Twitter @ZabelinDimitri.

Unsurprisingly, this has been a source of great confusion between Russia and the US, which were already in a state of uncertainty before the invasion. However, the conflict has also widened the gap between Washington and Beijing, a relationship that has been fragile following the trade war initiated by the Trump administration.

U.S. officials warned China that if it provided “material support” to Russia, sanctions could be imposed. During a panel discussion of the Friends of Europe conference, US Deputy Secretary of State Wendy Sherman sent a sharp message to policymakers in Beijing:

“They’ve seen what we’ve done in terms of sanctions, export controls, regulation, compared to Russia, so it should give them an idea of ​​the menu we can choose from if indeed China will provide material support.”

Washington offers a more friendly message toNew Delhi, stressed that it would work with the government to eliminate India’s dependence on Russian arms imports. Tensions between China and India over the disputed border along the so -called “Line of Real Control” (LAC) in the Himalayas have been a high priority for Indian President Narenda Modi.

Keeping military equipment in a credible relationship is important not only in China-India relations but also in the midst of a surge in inflation around the world amid a disrupted supply chain. These ongoing negotiations illustrate how in the 21st century global world, it is very rare that actions in one corner of the world will not resonate into another, affecting policy as well as markets.

READ MORE: How to Trade Political Impact on Global Financial Markets

US, EUROZONE CPI AND GDP DATA

Upcoming Eurozone CPI and GDP data could confuse the Euro and exacerbate its losses against the US Dollar if the results convince traders that the ECB may need to reconsider its rate hike plans. Last week, the Euro plunged after central bank President Christine Lagarde said monetary authorities may need to reduce growth prospects as a result of the fall of Ukraine’s war.

Combined with the Fed’s hawkish comments, this saw EUR/USD plummet as money markets raise their bets for an ultra-aggressive rate hike in 2022. US GDP and personal income/spending data will be published this week, and may exacerbate the pair’s uncertainty if numbers strengthen the Fed’s hawkish view.

If U.S. economic data surprises an increase, the U.S. Dollar may get a boost from two narrative forces. The first is the assumption that strong economic data will strengthen and even potentially boost the Fed’s already hawkish outlook. The second is tied to the first: the prospect of tighter credit conditions could cause markets to panic and push investors into the Greenback’s arms.

EUR/USD TECHNICAL OUTLOOK

EUR/USD is currently trading at 1.0697, the lowest level since March 2020, during one of the largest sell -offs in history in financial markets across asset classes. The pair’s decline began in January 2021, although a steeper downtrend developed in May and saw the fall accelerate. On Monday, EUR/USD experienced its biggest one -day decline since March 31, 2022.

EUR/USD – Daily Chart

EUR/USD Volatility to Swell?  Ukraine War, GDP and CPI Data Ahead

Source: TradingView

While there appears to be a directional trend, a positive RSI divergence could indicate an upcoming reversal. However, it should be noted that the phenomena observed in one indicator are not a guaranteed prediction for a particular outcome. The downtrend of EUR/USD may increase despite the differences shown in the Relative Strength Index.

Written by Dimitri Zabelin for DailyFX

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