Jerome Powell, Christine Lagarde and Andrew Bailey blamed pandemic and the war for sending inflation off the chart at a European Central Bank (ECB) event yesterday. We blame them for having called inflation transitory, and having been left behind the curve for too long.

The EURUSD slid to 1.0430, and the euro bulls are gently leaving the market, increasingly less convinced that Christine Lagarde doesn’t have a magic tool to address the fragmentation issue in Europe. The ECB is not expected to raise the rates by more than 25bp at its next meeting, even though inflation in Spain and Belgium advanced past the 10% level. So a 25bp hike may seem insignificant to you. To us, too. No wonder the euro-swissy is below the 1.00 mark. If the fall continues, the Swiss National Bank will likely intervene.

The US will release the latest PCE figure today, which will likely show no pleasant surprise in the US, either. Happily for the Federal Reserve, investors don’t care much about the PCE index, even though the latter is what the Fed is watching to determine whether inflation is in line with its policy.

But what’s worrying is the news that the banks have started cutting their earnings forecasts and price targets for US big tech stocks.

Elsewhere, tensions between Russia and the West continue rising as NATO decided to welcome Finland and Sweden in the alliance. Putin threatened that if NATO infrastructure is deployed in these countries, Russia will have to respond in kind. Oil prices remained fairly contained however, as the European Union agreed on a framework to eliminate carbon emissions for new cars and vans by 2035.

 

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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