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How will tighter monetary policy affect risk?

February 18, 2022

EUR/USD: The euro was little changed against the dollar on Thursday. The euro keeps being supported by statistics. According to previously published data, industrial production in Europe in December slowed down from 2.4% to 1.2%, well ahead of market forecasts of a slowdown to 0.3%. Year-over-year, industrial production increased by 1.6% after falling by 1.4% in November. Market participants believe that strong statistics can become an incentive for the ECB to raise rates. Immediate resistance can be seen at 1.14. A break to the upside can trigger growth towards 1.1450.

BUY STOP 1.1400/TP 1.1450/SL 1.1380

 

USD/CAD: The Canadian dollar was little changed against its safe-haven U.S. dollar on Thursday despite Wall Street tumbling on geopolitical worries, with investors sticking to bets that the Bank of Canada would hike interest rates multiple times in 2022. Money markets expect the BoC to hike on March 2 for the first time since October 2018 and six times in total this year. The price of oil, one of Canada’s major exports, settled 2% lower at $91.76 a barrel as talks to resurrect a nuclear deal with Iran entered their final stages, which could unlock more crude supplies. Immediate support is seen at 1.2670. A breakout below could take the pair towards 1.2620.

SELL STOP 1.2670/TP 1.2620/SL 1.2690

 

GBP/USD: Sterling strengthened against the dollar on Thursday, as expectations of a rate hike by the Bank of England (BoE) continued to support the pound, though the market was jittery about the threat of Russia invading Ukraine. Data showed on Wednesday that Britain’s inflation rose to a nearly 30-year high reinforcing expectations that the BoE will further hike interest rates. The BoE has already raised interest rates twice since December – lifting rates to 0.5% from 0.1% – and financial markets expect a further rate rise in March. Immediate resistance can be seen at 1.3620. A breakout up can trigger a rise towards 1.3670.


BUY STOP 1.3620/TP 1.3670/SL 1.3600