(Ipek Ozkardeskaya – Swissquote Bank Ltd)
The European Central Bank (ECB) rose its three policy rates by 50bp at yesterday’s monetary policy meeting, versus 25bp expected by analysts. One of the major highlights of yesterday’s ECB decision was the anti-fragmentation tool, TPI, transmission protection instrument. The name is fancy but what it could do to help the ECB is unsure for now, as the eligibility to the TPI sounds complicated – so complicated in fact that during her press conference yesterday, Christine Lagarde repeated ‘no, no it’s not that complicated’ several times when she answered questions.
With the ECB shifting to rate-tightening phase, we have no more than Switzerland and Japan left in the negative rate territory. The Swiss National Bank (SNB) already surprised the market with a 50bp hike in its last meeting and pledged to do more, but the Bank of Japan (BoJ) maintained its policy unchanged yesterday, and said it has ‘absolutely no plan’ to raise the interest rates.
The US dollar was softer yesterday, and the barrel of American crude slipped again below the $100 mark.
US stocks gained, but Microsoft announced it will slow hiring in its security software unit and Azure cloud business in the foreseeable future. 7-Eleven also said it will cut around 880 jobs, and Snap announced it will slow its rate of hiring ‘substantially’, as well.
Plus, Snap’s share price dived more than 26% in the afterhours trading after the company missed estimates on a major slowdown in the ad industry due to economic jitters. The Snap results came as a warning for other Big Tech names that rely on ad revenue. Therefore, FAANG stocks, which recovered to an almost 2-month high yesterday, may not extend gains to the weekly close as the latest Snap results could reverse appetite for at least a couple of them, including Google and Meta before the closing bell.
Euro set to close higher – Oil upside may be limited
(Naeem Aslam – Avatrade)
Forex
The Euro is sitting on decent gains this week, and it is set to close higher for the first time in three weeks as the ECB not only brought out its big bazooka but also increased the interest rate much more than the market expectations. The ECB increased the interest rate by 50 basis points yesterday when the market players were expecting an interest rate hike of 25 basis points. It was the first time in nearly 11 years that the ECB increased the interest and the region, its banks and consumers will now need to adjust to a new reality of higher rates.
Many traders are worried that the Eurozone’s economy isn’t strong enough to withstand higher rates, and to ease off those concerns, the ECB introduced its new tool, anti-fragmentations, which is designed to help the countries in the Eurozone where there are concerns for lofty debt piles such as Italy.
Oil
Oil prices are moving higher on the final day of the week as investors are concerned about rising covid cases in China. However, we think that the upside here may be limited as the gasoline consumption in the US isn’t showing promising numbers and the demand side of the equation is getting hit adversely.
On the supply side, there has been a call between Russia’s President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman where they discussed cooperation within the boundaries of OPEC+, and the emphasis has been on a further corporation. The OPEC meeting is only two weeks away, and traders are concerned if the cartel is going to release more oil or not, as prices are still painfully high.
Read Forex Technical Outlook: Gold (XAUUSD), EURUSD, NZDUSD, USDCHF
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