expand/collapse risk warning

CFDs come with a high risk of losing money rapidly due to leverage. 71% of accounts lose money when trading CFDs with this provider. You should understand how CFDs work and consider if you can take the risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

71% of retail investor accounts lose money when trading CFDs with this provider.

Market Insights

Trading Insights: Slow US growth, not a recession, adds further support for the Euro?

Daily insight

Chart 1 Source: Tradingview  May  04  2023 7:34  UTC Chart 1 Source: Tradingview May 04 2023 7:34 UTC

The above chart illustrates the weekly price trend for the EUR/USD

Market Talk

Today the ECB rate decision is on deck, but first, let’s talk about the Fed

  • Yesterday the US Fed hiked its rate by 0.25% as widely expected
  • What moved USD markets is speculation that the Fed is ever closer to ending its historic rate hiking cycle
  • The Fed Chairman did “push” back when reporters asked if the Fed will cut rates this year:

Fed Chairman Powell “We on the committee (FOMC) have a view that inflation is going to come down not so quickly” Fed Chairman Powell “We are prepared to do more if greater monetary restraint is warranted” Fed Boss (Chairman Jerome Powell) said that “The case of avoiding a recession is in my view more likely than that of having a recession”

More data to come over the next few months to see if the current Fed policy is going to be effective in bringing down inflation back towards the Fed’s 2% target

The EUR could see further strength if less credit is to be made available from US banks

  • Small - mid size US banks have been reducing credit availability to customers
  • Less credit in the system could help bring down inflation
  • Lower inflation outlook reduces the odds that the Fed will have to restart the rate-hiking cycle
  • The USD could further weaken as investors seek out higher-yielding USD alternatives which could support the case for the Euro to continue to trend higher against the USD

Upcoming Key events:

  • Friday May 05 12:30 UTC: US Nonfarm payrolls (NFP)

Today’s economic calendar

  • Thursday May 04 12:15 UTC: European Central Bank (ECB) interest rate decision, EUR/USD, EUR/JPY, EUR/GBP in focus

Source: TradingView / J. Knobel  May 04  2023 8:10  UTC Source: TradingView / J. Knobel May 04 2023 8:10 UTC

ECB Talk

European Central Bank (ECB) interest rate decision due at 12:15 UTC European Central Bank (ECB) interest rate decision due at 12:15 UTC

Macro commentary:

  1. Limited risk seen for the euro area from the recent banking “crisis”
  2. EU HICP Inflation is currently at 7%, down from 10.7% six months ago
  3. EU core inflation six months ago at 5%, currently at 5.6%
  4. Current EU M2 money supply is lower than three and six months back, suggesting that higher interest rates are having an effect on taking the “excess” liquidity out of the Eurozone financial system

Can the recent demand for Euros hold if the ECB holds the rate at 3.75%? ECB would have to see a larger upside move in core inflation to keep on hiking past June or July.

  • Even if core inflation does push higher, the ECB rate peak could halt between 3.75% and 4%
  • The ECB is still in the process of “shrinking” its very large balance sheet

Today’s trading bullets

Norges bank hikes +0.25% as expected, signals a further 0.25% hike in June

  • EUR/NOK hits fresh multi-year highs

EUR/NOK hits fresh multi-year highs

  • EUR/USD tested the 1.1090s, current price 1.1052 as of 8:09 UTC. Potential upside price extensions towards 1.1130s - 1.1225s provided price can push above the 1.1090s. Downside risk for longs below the 1.0940s support

EURUSD

  • EU 50 (Eurostoxx 50 Index) recent downside pressure seems to be a corrective move of the March 20th 2023 - April 21st 2023 advance. Current price 4,293 at time of writing is slightly above the key support near 4,270. Provided the 4,270s support can prove true, the prospects for a resumption of the prevailing multi-week uptrend can not be ruled out.

EU 50 (Eurostoxx 50 Index)

Capitalise on volatility in Forex markets

Take a position on moving Forex prices. Never miss an opportunity.

Sign up

Not investment advice. Past performance does not guarantee or predict future performance.