Market still expect higher interest rate from ECB in 2019

Posted 11 February, 2019

Although the European Central Bank adopted a more flexible approach and the euro-area economy continued posting slower upturn, the market participants keep on believing that the regulator will eventually dare to raise the interest rate until the end of the year.

This investors’ confidence fits better for the longer-term euro perspectives. At a certain stage, given the possibility of the further slowdown in the regional economy, markets will have to drastically adjust their forecasts, entailing the sharp liquidation of the euro long positions. Moreover, further softening of the inflation pressure will also conflict with the prospects of tighter policies in the euro-area.

However, the regional environment is only one of the threats to the euro. Being a high-yielding asset, the euro is likely to collapse due to a risk aversion. Given the general signs of a decline in global economic growth, investors are more likely to be cautious. At present, the US dollar benefits from this situation.

At the start of the week, the euro to US dollar rate touched a bottom of 1.13 recorded last time on January 24. Attempts to regain positions are fruitless so far, the market remains bearish even despite the signs of the oversold market in the short-term charts. The next point can be the break of the 1.13 handle with further movement to 1.1270, which will impact the euro prospects and fuel the downtrend. 

Previous forecast

13 February, 2019 15:09

← Euro-area figures put pressure on euro

A new set of negative reports has hit the euro area by the middle of the week. According to the available data, the regional industrial production dipped by 0.9%, while expectations were voiced at 0.4%. Notably, this downturn has been the major since the global financial crisis. After the 3-month bottom recorded yesterday, the euro still can be depressed by the European economic reports, Brexit and new fears of the global economy state. In the near term, the euro-to-US dollar rate will keep facing negative risks.

Euro-area figures put pressure on euro

Next forecast

11 February, 2019 17:35

US-China trade talks again take centre stage in oil market →

Following the Friday trading session, the Brent oil prices managed to slightly regain positions. However, the overall figures showed that the last week brought some 1% decline. The quotes saw some support at the $61/bbl handle and improved to $62/bbl. Despite the increase, the oil market has remained shaky and started this week with a price decline. The current price stays near $61.80/bbl. In the short run, the Brent prices will remain based on the stock markets and macroeconomics. The main event for this week – US-China trade talks. The price still can fall below the $60 handle.

US-China trade talks again take centre stage in oil market
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