Weekly Market Outlook: ECB and US Inflation in Focus
All eyes turn to the European Central Bank on Thursday this week and its latest monetary policy decision. The Russian invasion of Ukraine is likely to have a strong impact on the European economy, so investors will be keen to know how the bank will react.
US inflation figures will also be widely watched on Thursday with the forecast to be another rise. The US dollar already moved significantly last week after Fed Chairman Jerome Powell endorsed a 25 basis point interest rate hike later this month.
The global stock market sell-off continues with European stock indices such as the DAX 40 and FTSE 100 leading the way due to the impact of Russian sanctions. The ongoing Russia-Ukraine war is still likely to drive the flows in and out of the financial markets this week.
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Weekly Forex Calendar
Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admirals.
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Trader’s Radar – ECB Press Conference
On Thursday 10 March at 12.45 pm GMT, the European Central Bank will release its latest monetary policy statement and interest decision followed by a press conference at 1.30 pm GMT. No changes are expected in the central bank’s plan to normalise policy but the Russia-Ukraine war may have an impact on policy decisions.
The central bank is now facing some very tough situations. Soaring inflation which jumped to a new all-time high in February, energy prices soaring to record highs and affecting household bills and the impact of Russian sanctions that will also affect the Eurozone.
The euro has been in free fall against nearly all other major currencies. The euro has fallen the most against commodity currencies such as the Australian dollar and New Zealand dollar which have been surging higher due to higher commodity prices.
Source: Admirals MetaTrader 5, EURUSD, Monthly - Data range: from 1 Jul 2005 to 5 Mar 2022, performed on 5 Mar 2022 at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The long-term, monthly price chart of EURUSD shown above highlights the range that has developed since 2014 between the two black horizontal support and resistance lines from circa. 1.2226 and 1.0519.
With divergent monetary policy between the Fed and the ECB, the trend lower in EURUSD could continue all the way down to the lower support level. As volatility is very high in the current climate, traders may opt to view the price action on the lower timeframes for more clues on the direction.
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Corporate Trading Updates and Stock Indices
Global stock markets took another leg lower last week but to varying degrees. The DAX 40 index was down more than 10% on the week with the FTSE 100 index down around 8%. However, US stock indices were down around 4% for the week.
This highlights the concern from investors that the UK and European economies could feel the biggest impact from Western sanctions on Russia. However, sentiment is still weak all over the world with prices likely to trade according to the headlines from the current conflict.
Exercising proper risk management is key towards managing the volatility of the market at the current time.
Source: Admirals MetaTrader 5, SP500, Daily - Data range: from 14 Aug 2021 to 5 Mar 2022, performed on 5 Mar 2022 at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. Past five-year performance of the S&P 500: 2021 = 26.99%, 2020 = +16.17%, 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%
The S&P 500 stock market index shown above highlights the range-based nature of the index at the current time. The sell-off which started in late December has stalled at the black horizontal support line circa. 4,268.00.
Long-term buyers may see this as an area to build from, while short-term momentum traders may be looking for the trend lower to continue. The battle between the players is causing up and down moves that are not moving in a significant direction.
However, the index is trading at an important price level. Using technical analysis tools such as cycle formations, price action patterns and technical indicators can help to identify who is in control of the market as price unfolds.
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