European Forex news roundup – Markets take a riskier stance
Forex news from the European morning session on December 17, 2021.
Markets began risk-off as the week’s breadth of central bank action was absorbed. As the dust settles, there is a broad shift toward a more hawkish stance. The Fed announces three raises, the Bank of England hikes as the first G7 bank, and the ECB signals the end of PEPP for March and sends out warnings about rising inflation. All of this indicates that central banks are beginning to prioritize inflation over Omicron threats.
The Eurozone experienced a continual stream of data, all of which confirmed the ECB’s forecast of higher inflation and lower growth. German IFO business data fell short across the board as pessimism among German firms grew. Germany’s y/y PPI number was the highest since November 1951, when compared to the previous month. According to Destatis, the primary cause of the increase was an increase in energy prices. This is consistent with the ECB’s recent hike in inflation expectations. The Bundesbank also raised its inflation projection to 3.6 % (from 1.8 % in June) and lowered its 2022 GDP growth forecast to 4.2 % (from 5.2 % in June).
Inflation is driven by fear of inflation.
One thing to keep in mind is that inflation can be driven by fear of inflation. This is one of the issues that the Bank of England is attempting to solve with its rate hike. They perceive rising salary and cost pressures and realize that this will result in higher prices. I know that’s a valid statement, but if it enters the system, it will work its way through the entire cycle. The fear or anticipation of this raises prices even further.
Today is quad witching, so expect a rough close. Gold has continued to surge post-Fed, and platinum has some of the finest seasonals around, so it might be a wonderful trade to start 2022.
EUR/USD came under renewed bearish pressure during the European trading hours and extended its slide in the early American session toward 1.1300. The risk-averse market environment ahead of the weekend is helping the greenback stay resilient against its major rivals.
GBP/USD falls back to pre-surprise BoE rate hike levels underneath 1.3300 . The pair is now back to its pre-surprise BoE rate hike levels
Other markets :
- FTSE – +0.13%
- Dax -0.88 %
- CAC – 1.08%
- Gold – +0.67%
- Silver – 0.76%