The World Bank and International Monetary Fund conference, which began yesterday, may bring more clues for financial markets. According to sources from the Axios portal, US Treasury Secretary Janet Yellen will express at the conference that the US and global economies are in good shape and the disinflationary trend is continuing. Such a stance could help the US dollar. According to Axios, U.S. financial sector representatives are cautious about pessimistic comments because they fear accelerating the economy's hard landing scenario. The opposite stance is expressed by the head of the IMF, Georgieva. In her opinion the world economic growth pace is slowing down significantly, amid systemic risks.
On EURUSD, bulls have a clear problem overcoming the 1.10 level resistance. Yesterday, the USD weakened after a speech by John C. Williams, head of the New York Fed, who expects a gradual rise in US unemployment. Markets are concerned that the prospect of a drop in US inflation to 3.75% may be associated with an imminent slowdown. While a 25bp hike in May seems likely, the Fed is nearing the end of its tightening, while the ECB is likely to continue it.
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- I expect a gradual increase in the unemployment rate to 4%-4.5%. The stabilization of the labor market has been a noteworthy development;
- The inflation outlook is uncertain but I anticipate 2% by 2025. This year, I expect inflation to reach around 3.75%.
- In the wake of the turmoil, the Fed is closely monitoring credit conditions. Historically, stress on the banking system has resulted in tighter credit conditions;
- Fed rate hikes have not been the cause of recent developments in the banking sector. Fighting inflation is key;
- Core services inflation excluding housing has been extremely persistent recently. Inflation from the rental market appears to be easing sharply.
EURUSD chart, H1 interval. The Eurodollar has dynamically recovered from moments of weakness below the 23.6 Fibonacci retracement of the upward wave that began in mid-March and has risen above the SMA100 and SMA200 averages. To date, however, the volume of buyers remains relatively small. This means that at the current level of 1.09, set by previous price reactions, the battle for further momentum for the EUR may play out. A drop back below the SMA100 and SMA200 could signal broader momentum for the USD and a correction of recent increases. Source: xStation5
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