Trading financial products on margin carries a high degree of risk and is not suitable for all investors. Please ensure you fully understand the risks and take appropriate care to manage your risk.



Skilling Ltd, is regulated by the Cyprus Securities and Exchange Commission (CySEC) under CIF license No. 357/18


Skilling (Seychelles) Ltd, is authorized and regulated by the Financial Services Authority (FSA) under license No. SD042

Market Insights

Euro analysis interest rate outlook

Blog Images - Skilling (5).png

In terms of EUR/USD we have seen the euro fall in response to Russia's invasion of Ukraine and the trend is down. Below a summary of the fundamentals, sentiment and key technical levels of support and resistance.

Inflation and Interest Rates

Flash HICP inflation increased to 5.8% y/y in Feb, up from 5.1% y/y in Jan. The increase was largely due to an increase in commodity prices which are likely to push inflation even higher in coming months. Higher inflation though does not mean higher interest rates.

Higher commodity prices from here are likely to increase the risk of a recession. The ECB is unlikely to increase interest rates into a supply shock which is due to the Russia-Ukraine conflict. Europe is heavily reliant on Russian energy with Russia presently supplying 25% of Europe's oil and gas. Energy prices are high and expected to remain elevated in the coming months. In response to this, the ECB will be patient not just in terms of raising interest rates but also in terms of reducing stimulus.

In terms of the market, it was discounting four rate hikes by the ECB this year a month a ago but still sees more than two hikes this year which can be seen on the chart below:

EURO ANALYSIS Interest Rate Outlook image

This could prove to be optimistic judging by recent comments from ECB members.

Interest Rate Differentials and Economic Growth Favour the USD

Even if the ECB does hike twice, the Fed will hike more times with the market discounting 5 rate hikes. Economic growth is stronger in the US, inflation is higher and interest rate differentials are in favour of the USD both now and going forward.

Technical Analysis On the daily chart we have resistance at 1.1200 and 1.1300. On the monthly chart we have major support at 1.0500 and key resistance is at 1.1300.

EURO ANALYSIS Interest Rate Outlook image 2

EURO ANALYSIS Interest Rate Outlook image 3

Scaddon Analysis: For Daily FX Video Analysis & Education Click Here

Information on this website does not constitute endorsement or recommendation by Skilling

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

Related Articles

Stock of the week: Peloton

2022 has been a pretty hostile environment for investors. Most stocks are down on the year. Even titans like Google and ...

Challenges for the global economy

There are some enormous challenges facing the global economy right now. Many are unfamiliar challenges that have not bee...

Luna & the Terra attack

Another action-packed weekend for crypto and the zeitgeist was dominated by a reported attack on Terra’s USD peg (UST), ...