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Trading ideas for EUR/USD, GBP/USD and Brent

March 18, 2022

EUR/USD: The European currency continues to strengthen against its main competitors – the yen, the pound and the U.S. dollar. Yesterday the February inflation data for the euro area was released. The consumer price index rose from 0.3% to 0.9% mont-over-month and from 5.8% to 5.9% year-over-year. Overall, inflationary pressures in the European economy are likely to keep growing. Also, the president of the European Central Bank, Christine Lagarde commented on the current economic situation. She said that the regulator will not raise rates immediately after the completion of the asset purchase program and will start this process after some time. ECB chief economist Philip Lane said that core inflation, which was 2.9% in February, is likely to decline over time due to a gradual decline in fuel prices.

BUY 1.1105/TP 1.1190/SL 1.1080

 

GBP/USD: British investors are contemplating the results of the Bank of England meeting. The regulator raised the rate from 0.50% to 0.75% as expected, and it was the third increase in a row. Eight out of nine members of the Monetary Policy Committee voted for the rate increase. Only deputy chairman of the regulator John Cunliffe was against the increase, who warned about the possibility of a strong impact on demand due to higher commodity prices. As for inflation, the officials believe it will continue to rise and may reach 8.0% in April and become even higher by the end of the year. The accompanying statement indicated that a further moderate rate hike looks appropriate, but its implementation will depend on how the economic outlook evolves. All in all, the Ukrainian crisis will keep clouding the economic outlook, bringing more uncertainty, which causes price increases and reduces the purchasing power of ordinary British households.

SELL 1.3141/TP 1.3095/SL 1.3165

 

Brent: Brent continues to rise. The increase in prices is supported by pessimistic statements of the International Energy Agency (IEA), according to which the oil market may face the largest supply crisis in a decade because of the shortage of Russian oil in the amount of 3 million barrels per day. The effects of anti-Russian economic sanctions will be felt as early as April and may cause a “global supply shock”. According to the agency, Russia is currently the leader in oil exports, and supply disruptions could slow global economic growth. Accordingly, the slowdown of economic growth may lead to a reduction in oil demand by 1.3 million barrels per day in the second, third and fourth quarters of this year.

BUY 107.40/TP 112.60/SL 105.00