ECB Appears More Hawkish than Expected, US CPIs Accelerate Further

ECB TO END APP SOONER, FED COULD HIKE FASTER ON RISING INFLATION

The US dollar traded mixed against the other major currencies on Thursday and during the Asian session Friday. It gained against GBP, EUR, JPY, and CHF, in that order, while it slightly underperformed versus CAD, AUD, and NZD.

EUR/USD — TECHNICAL OUTLOOK

EUR/USD spiked higher after the ECB decision, but found resistance slightly above 1.1095 and pulled back again. The retreat confirms our view that as long as the rate remains below the downside line drawn from the high of February 10th, the bears have decent chances of jumping back into the action. That’s why we will maintain the view that the short-term outlook is still negative.

GBP/USD — TECHNICAL OUTLOOK

GBP/USD traded lower yesterday, after hitting support at 1.3195 yesterday. At the time of writing, the rate is testing the 1.3085 barrier, where a dip would confirm a forthcoming lower low. This, combined with the fact that Cable continues to trade below the downside resistance line drawn from the high of February 23rd, keeps the short-term bias to the downside.

AS FOR TODAY’S EVENTS

During the early European session, we already got the UK monthly GDP for January, as well as the IP and MP rates for the month, all of which decently beat estimates. However, in our view, this is far from enhancing the case for a double hike at the BoE’s upcoming gathering, and this is evident by the fact that the pound did not respond at the time of the release. With Russia’s invasion of Ukraine raising concerns over the global economic performance, we see a 25bps hike as the best-case scenario.

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