Drop on the Head?
The EUR/USD trading pair had a longer pullback from its weekly high. It was pressured in the intraday low close to 1.1330, while the US dollar had a surprise movement towards risk-aversion on Thursday during the early European session.
EUR/USD price chart. Source TradingView
The US dollar index that monitors the greenback against a range of other leading global currencies made a reverse from a downward trend of three days to have a high daily gain of about 96.00 following reports by Sputnik that Ukraine broke the agreed ceasefire by firing mortar shells into four Luhansk People’s Republic locations. The market was in a celebratory mood when Russia announced the return of its troops to their bases after military drills at the Ukraine border. The celebration was, however, short-lived as Ukraine, Estonia, and Western powers cast doubts on Russia’s moves.
In a reflection of the latter market mood, stock prices had a shock fall, and the American Treasury bond yields dipped while conservative safe-haven commodities like gold sold upwards as a result of the rush to safety.
Before now, the expected Federal Open Market Committee minute indicates some hawkish fears pervading the FOMC board members, but there was no firm support for an interest rate increase of 0.50% in March, which may have been caused by market analysis before the inflation.
News media had reported that the Federal Reserve’s top officials came to a conclusion last month that it was high time to implement monetary policies. Also, it was stated that decisions would be dependent on the analysis of data from every meeting, in accordance with the minutes of the latest policy meeting.
Meanwhile, the Governor of Latvia’s Central Bank and a member of the European Central Bank Governing Council, Martin Kazaks, mentioned on Wednesday that it is likely there will be an interest rate increase this year. He, nevertheless, recommended a carefully implemented adjustment of the policies while he posited that money market speculations that link possibility to an ECB rate increase by the end of the first half of 2022 are a bit too harsh.
It should be noted that the latest positive statements coming from European Central Bank policymakers will be tested on Thursday by the expected publication of the ECB Economic Bulletin, which comes eight times annually. Of equal importance is the statement expected from the ECB’s Philip Lane.
American Retail Sales and Industrial Production increased considerably over market expectations and former readouts alongside the recent month-on-month numbers of 3.8% and 1.4% respectively in January.