ECB rise in parity, dollar’s eye on inflation

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Messages from the European Central Bank’s (ECB) hawkish executives and Ukraine’s recovery from Russian occupation in the war pushed the pair up to 1.098, the strongest daily gain since March (1.6 percent). Dollar The weak course of the index before the inflation data from the USA and Europe continued at the beginning of the week with the expectations that the ECB will become even more hawkish. The dollar index, which saw the new peak of 20 years by exceeding the level of 110 last week, fell to the level of 107,810 on Monday. Inflation is expected to decline to 8.1 percent in August from 8.5 percent in July. In Germany, on the other hand, the expectation is that the level of 8.8 percent in July will not change, but prices may rise again in September after some supports such as discounted public transportation end in August.

Bundesbank statement effective: Inflation may peak in range

Joachim Nagel, President of the German Central Bank (Bundesbank), said that the increase in prices will accelerate and inflation may reach a peak of over 10 percent in December. Nagel, who is also a member of the ECB Governing Council, stated that there are signs that inflation has spread to many areas, “The ECB Governing Council’s step to increase the three main policy rates by 75 basis points on September 8 was a clear sign, and if the inflation picture remains the same, clearer steps should follow.” used the phrase.

The news that the ECB thinks the possibility of raising the interest rate up to 2 percent in order to rein in inflation also supports the pair. Five sources told Reuters on Saturday that there is growing expectation among policymakers that interest rates will need to be raised to a “restrictive” level. Restrictive interest The expression rate means 2% or higher levels that will cause the economy to slow down. ECB President Christine Lagarde also answered the question “What is the neutral interest rate” at the press conference last week, “We are not there right now” and pointed out that there may be two or three more rate hikes.

Centers will also look carefully at energy and non-food inflation

During this week, inflation data from European economies for August are expected to guide the course of both the dollar and the euro. (Tuesday) US, Germany, Spain, (Wednesday) UK, (Thursday) France, (Friday) Italy and Euro Zone final consumer inflation data for August will also see the effects of the complete cessation of flows in Nord Stream 1. The course of core inflation data excluding energy and food is also critical for the steps to be taken by central banks in future meetings, as it sheds light on wage increases and how services sector prices feed inflation.

Livelihood crises strengthen the hand of both the ECB and the Fed in tightening, and the aim of interest rate hikes is to reduce inflation, which has reached its peak in 40 years. However, the news that a big investment bank like Goldman Sachs in the USA is preparing for layoffs supports Fed Chairman Jerome Powell’s warnings that “the fight against inflation will be painful”. The new support package, which is expected to be announced by the President of the European Commission Ursula von der Leyen this week and which is planned to include an extraordinary intervention in energy prices. EuroA development that could have an impact on the course of.

“Parity energy prices will not rise until they calm down”

Standard Bank G10 strategy director Steven Barrow stated that the rise in the parity was supported by the discussions on the continuation of the interest rate hikes in the ECB, adding, “However, I am not convinced that an upward trend has started at this stage. The situation with the euro is only energy it will change when the problems related to the prices subside”. According to the Bank of New York Mellon data, the short positions of global investors in the Euro (which they took with the prediction that it will fall) have increased as much as today only 5 times in the last 20 years. Geoff rey Yu, one of the bank’s strategists, said, “Normally, to justify adding clients to these short positions, we have to say that the euro is experiencing existential problems, otherwise the financial system is facing systemic risks. However, both are not plausible predictions for the Eurozone at the moment,” he says, adding: Investors are taking short positions in the euro to adapt to the new situation.

Progress of Ukraine also supported Antony Foster, director of spot transactions for G-10 currencies from Nomura International, states that the progress of the Ukrainian forces on the ground against Russia also supports the Euro.

German President: The poor may lose their homes

An important statement from the Union’s largest economy came from the President of Germany, Frank-Walter Steinmeier. Steinmeier said that poor people and especially families are in danger of losing their homes due to rising energy prices. “Poor people, especially families, who cannot pay their rent or service fees due to rising prices, are at risk of losing their homes. Also, people looking for a home may find it even more difficult to find affordable housing,” said Steinmeier. Emphasizing that according to estimates, more than 300,000 people live without a house in Germany, which is roughly equal to the population of a big city like Münster or Karlsruhe, Steinmeier emphasized that this number is in danger of increasing even more in the coming months and said, We must use all our means so that they do not lose their lives and stay on the streets,” he said.