Welcome to our regular recap of the most interesting fundamental events that influenced our trading last week.
The beginning of the week was somewhat weak from the position of fundamentals... But this changed at the end of the week when the markets were hit by the news of the Russian invasion of Ukraine.
A somewhat quiet Monday on the European currency was stirred up by the exit of the President of the European Central Bank (ECB) - Christine Lagarde, who again addressed topics related to inflation. Lagarde sees the likelihood that current price pressures will subside before they have time to settle...
She added that the chances of inflation stabilising at our target had increased. However, there are no signs that inflation will be persistently and significantly above our target in the medium term, which would require a measurable tightening.
However, inflation will remain high in the near future and the ECB sees the risks to the economic outlook as broadly balanced in the medium term.
The euro remained less volatile after a significant increase the previous week. This did not change even after the withdrawal and it entered into a slight consolidation.
The second half of the week held some interesting speeches for the US currency by members of the US Federal Open Market Committee (FOMC), on behalf of the various Federal Reserve Presidents in San Francisco, Atlanta and Cleveland.
Inflation was again the main topic in the panel discussions.
Here we have several statements by FOMC members:
President of the San Francisco branch of the Federal Reserve Mary Daly told CNN in an interview that she is in favor of a rate hike in March, but the Fed cannot be overly aggressive in raising rates.
President of the Federal Reserve Bank of Atlanta Raphael Bostic says we may be on the verge of a decline in inflation, and there is evidence to suggest it is falling.
Fed President in Cleveland Loretta Mester expects inflation to moderate based on the Fed taking "appropriate action."
It is clear from the discussions that most members believe that inflation will be better and that the Fed will take appropriate measures to bring inflation under control. Raising interest rates may be on the agenda. So the question is: what is "appropriate action"?
At the end of the week, the Fed released its Monetary Policy Report, containing discussions on the conduct of monetary policy, economic developments and future prospects.
You can read the full report here:
However, the Japanese yen experienced a decent rise on Friday, reacting to the White House press conference.
The US believes that Putin has decided to invade Ukraine and has announced these plans to the Russian military.
This news was followed by big moves in the markets and all the money in the forex market is flocking to the yen as a safe haven.
Defense officials expect a horrific and bloody campaign that will begin with two days of electronic warfare bombing, followed by an invasion with the possible goal of regime change. The North Atlantic Council has been informed of this new report.
If people fear the coming of an economic catastrophe, they flee with their capital to safe havens where they can weather the troubles without much loss. Outside of the classic port of call of precious metals (gold), a mature economy with developed capital markets and a stable political backdrop is the best choice. For this reason, the Japanese yen is the currency of choice in times of uncertainty.
What's in store for the current trading week?
Next week will be richer in economic data. In the first half of the week, GDP data from the euro area and the Consumer Price Index (CPI) of the UK and Canada will be released.
However, the markets will be breathlessly watching the current events and developments in Ukraine, as it is believed that Russia may attack at any moment.
There is a certain assumption that traders will have in their outlook mainly currency pairs that contain the Japanese yen and gold.
That's why he follows us, to keep you in the loop!