Dollar dips as Fed signals only one rate hike this year

Dollar dips as Fed signals only one rate hike this year

European Central Bank President Christine Lagarde said on Wednesday that the ECB's interest rate hikes were just beginning to have an impact on the economy, but the pass-through could become stronger due to turmoil in the banking sector. Investors are considering whether the European Central Bank will be able to keep raising interest rates to fight high inflation despite the turmoil in the banking sector. Lagarde said the ECB's move to raise borrowing costs could be amplified if banks become more risk-averse and start demanding higher rates when they lend, which could mean the central bank needs to raise rates in smaller increments. She reiterated the ECB's determination to cut euro zone inflation to 2 percent from 8.5 percent last month, noting that past rate hikes are only starting to have an impact on the economy. Separately, Bundesbank President and ECB Governing Council Nagel said on Wednesday that the ECB will need to keep raising interest rates if inflation follows the path predicted last week, especially if inflation risks are skewed further upward. The European Central Bank last week raised interest rates by 50 basis points to 3%, but gave no guidance for future action.

The dollar slipped on Wednesday after the U.S. Federal Reserve raised its key interest rate by 25 basis points, as expected, and signaled only one more hike this year. The Fed expects to hike rates by at least 25 basis points by the end of 2023. The sudden collapse of Silicon Valley Bank and Signature Bank this month prompted a key shift in the Fed's latest statement, which no longer included language that "continuing to raise rates" might be appropriate. This language has been included in every policy statement since the March 16, 2022 decision to start the rate hike cycle. Federal Reserve Chairman Powell said at a press conference after the Federal Reserve announced interest rate hikes that their banking system is sound and resilient, with strong capital and liquidity; they will continue to closely monitor the status of the banking system and are prepared to use our All tools to keep it safe and sound.

The trend of EUR/USD, as seen in the technical chart, the 10-day moving average broke the 25-day moving average to form a golden cross, which is a very important upward technical signal. In addition, the MACD indicator has also broken the signal line. It is expected that the EUR/USD will soon Big chances continue to rise. If calculated based on the cumulative decline starting from the high of 1.1033 on February 2, the rebounds of 50% and 61.8% are seen at the levels of 1.0780 and 1.0840 respectively. The important midline resistance reference is the 1.10 mark to the 1.12 level. The support l looks back at the 100-day average line of 1.0590 and the 1.05 points, and then refers to the 250-day average line of 1.0390.

This week's news:
German ZEW economic sentiment index in March was positive 13.0
German ZEW economic conditions index in March was negative 46.5

ECB's Lane: Euro zone core inflation to ease as energy prices fall
ECB's Nagel: Stubborn inflation may require further ECB rate hikes

Eurozone's seasonally adjusted current account surplus of 17 billion euros in January

ECB's Lagarde: ECB will watch for signs of pressure on bank rates
Estimated volatility:

Resistance 1.0780 - 1.0840 – 1.1000* - 1.1200
Support 1.0590* - 1.0500 – 1.0390

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