Russia Steps Up Attacks, BoC Decides on Rates, Fed’s Powell Testifies

STOCKS TUMBLE AS RUSSIA’S ATTACKS INTENSIFY

The financial world was spooked once again on Tuesday and during the Asian session Wednesday, with equities around the world seeing another day of losses. All the major indices under our radar except one were a sea of red, and apparently the driver was once again the escalating crisis in Urkaine. After ceasefire talks failed to reach breakthrough, Russia lunched rockets on several Ukrainian cities, including Kharkiv, while global sanctions against Russia tightened.

WILL THE BOC HIKE INTEREST RATES THIS TIME?

As for today, besides the developments surrounding the crisis in Ukraine, Loonie traders may also keep an eye to the BoC decision. At its latest gathering, the BoC decided to keep interest rates untouched at 0.25%, at a time when the financial community was expecting a hike. In the statement accompanying the decision, it was noted that the Council expects rates to increase, and that the overall economic slack is now absorbed, which means that they are more likely to hit the hike button today.

USD/CAD — TECHNICAL OUTLOOK

USD/CAD traded higher yesterday, but hit resistance at 1.2750 and pulled back again. Overall, the pair is back within the sideways range that’s been in place since January 27th, and thus, we will consider the short-term picture to be neutral.

FED CHAIR POWELL TESTIFIES BEFORE CONGRESS

In the US, Fed Chair Jerome Powell will testify on monetary policy before the House Financial Services Committee, and again before the Senate Banking Committee tomorrow. At the latest FOMC gathering, Powell sounded more hawkish than expected, cementing expectations over a rate hike in March, and encouraging participants to price in around six quarter-point increases by the end of this year. Remember that the December “dot plot” pointed to only three.

EUR/USD — TECHNICAL OUTLOOK

EUR/USD fell sharply yesterday, after hitting resistance at 1.1235. The slide brought the rate below the 1.1107 barrier, marked by the low of February 24th, thereby confirming a forthcoming lower low on both the 4-hour and daily charts. This, combined with the fact that the rate is also trading below the downside resistance line drawn from the peak of February 10th, suggests that the outlook is still bearish.

AS FOR THE REST OF TODAY’S EVENTS

During the EU session, Eurozone’s preliminary CPIs for February are coming out, with the headline rate expected to have risen to +5.3% yoy from +5.1%, and the core one to jump to +2.7% yoy from +2.4%. Remember that at the press conference following the latest ECB decision, President Lagarde said that inflation remained elevated for longer than previously thought, and that the economy was hurt less than anticipated by the pandemic. She also added that the March and June meetings would be essential for evaluating their guidance, which means that they could, after all, decide to lift rates this year.

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