2023/01/22 (153.016) Technical Analysis – … & IDC-EURUSD

ECB Boss Lagarde Goes Hawkish In Public Last Week,
May Be That`s Why EURUSD Pair To Dance Around 1.08 EURUSD


ECB Underpins Concerns About Euro Fiscal Policy
Concern is growing in the ECB Council that the euro countries are exacerbating the inflation problem with their policies – combined with the warning that interest rates will be raised more than the ECB members have publicly stated so far. What the past week confirmed.

The European Central Bank (ECB) has substantiated its concern that an overly expansive fiscal policy in the euro area will exacerbate the inflation problem.
In an analysis from the new ECB economic report published in advance on Tuesday, ECB experts come to the conclusion that the state aid in many euro countries against the high energy prices in the current year 2023 will again lead to an even more expansive fiscal policy than has been the case so far by the EU – Commission subordinate. Against this background, they also renew their call for the aid to be more targeted. It is and remains the case that the euro can only be maintained with left-wing green politics, namely red socialist support programs, under the guise of a liberal democracy. Anyone who knows me knows that as a fundamentally conservative, freedom-loving cosmopolitan, totally attached to my homeland, I would prefer a peaceful dissolution of the euro – mind you, a dissolution of the euro and not the EU. But that is a fundamental political decision – and not politically wanted by the majority of Europeans at the moment. Which is why I have come to terms with the fact that the EU is being turned inside out in terms of both fiscal and monetary policy. To keep the euro alive.

But even hesitation about a restrictive, hawkish monetary policy, let alone fiscal policy, will one day come to an end.
Which is why ECB boss Lagarde, for better or for worse, more or less announced further interest rate hikes at the World Economic Forum in Davos.

The European Central Bank is not moving away from the newly adopted interest rate. In the fight against persistently high inflation in the euro zone, ECB President Lagarde announced further increases at the World Economic Forum in Davos. European Central Bank (ECB) President Christine Lagarde described inflation in the euro zone as still “despite the recent decline”. much too high”. At the World Economic Forum in Davos, Lagarde made it clear that the central bank must remain “on course” in the fight against inflation. At an annual rate of 9.2 percent in December, inflation is just below the record high of more than in October ten percent had been reached. Most recently, at the interest rate meeting in December, the ECB President spoke out in favor of further interest rate hikes of 0.50 percentage points each in order to get inflation under control. The aim is to bring the rate of inflation back up to the ECB’s medium-term target of two percent.

Stock Exchanges Reacted Unsettled To Hawkish ECB Boss Last Week

The stock exchanges reacted promptly to the statements made by the head of the ECB in Davos. The DAX temporarily increased its losses and was 1.57 percent lower at 14,943 points. Recently, falling inflation rates had fueled speculation that the major central banks would slow down interest rates on the financial markets. Despite the difficult economic situation, which is currently also reflected in the high inflation, Lagarde also sees positive signals for the euro zone. The growth projections for 2023 would be 0.5 percent, said Lagarde: “So this is not a brilliant year, but it is much better than what we feared.”

According To The ECB Minutes, The Euro Depreciates Slightly On Thursday

The minutes of the latest ECB meeting were released on Thursday but did not trigger any major moves in the markets as sentiment has already been affected, if I am not mistaken, by Lagarde’s comments at the World Economic Forum in Davos.

Many members were in favor of raising the ECB interest rates by 75 basis points.

Some argued that raising interest rates by less than 75 basis points would send the wrong message and risk being seen as inconsistent with the 2% inflation target.

A compromise was seen in some ways as largely equating to a 75 basis point hike in interest rates at the current meeting.

Lane’s proposal to raise interest rates by 50 basis points was supported by a large majority of members.

The current projection for 2025 should not differ significantly from 2%.Some participants said they would prefer to reduce the APP more quickly.

It was felt that the risks to fundamental inflation estimates could be more fairly assessed over the longer term.

A 50 basis point hike at the current meeting would allow the Governing Council to tighten monetary policy for an extended period of time.

A notable change in the external environment has been the recent appreciation of the euro, which is likely to mean somewhat lower inflationary pressures for the euro area going forward.

Previously, ECB President Lagarde had once again expressed criticism. Lagarde said inflation was far too high and warned doubters about the ECB to “revise their positions”. Lagarde assured that the ECB would maintain the course of rate hikes. She also indicated that inflation expectations are not weakening and reiterated the central bank’s determination to further tighten policy. If I’m reading correctly, little remains of the dovish tone set off by rumors of possible rate cuts. On the other hand, the EUR fell slightly in the short-term, possibly due to rising yields in the US. At the same time, yields in Germany also rose sharply. Which could continue as the ECB’s room for improvement (on the subject of rate hikes) is much higher than the Fed’s. Because the FED will only raise its interest rates 1.2 times – a maximum of 2.3 times – this year 2023. And that then only by 25 basis points is an unspoken clear thing for stock market veterans like me. And it goes without saying that the responsible members of the FED do not formulate this clearly and in detail in public either. They are much too much a political diplomat for that – and they do not want to directly influence market price actions with their own statements. And that’s just as well! What else would I have to analyse, to comment on, to evaluate, to write?