Russian sanctions and FOMC minutes due
EUR/GBP => The pair falls towards 0.83
Natural gas => The commodity jumps to a 5-month high
Gold => The commodity falls to $1920
Will EZ wholesale inflation data lift EUR/GBP
EUR/GBP has fallen almost 1% so far this week, as escalating tensions in Ukraine and the prospect of further sanctions on Russia hurt demand for the euro.
Meanwhile, the Pound benefitted from stronger than expected service sector activity. The service sector showed rapid growth in March as Omicron cases eased and restrictions were removed.
Strong growth was recorded despite a subcategory showing that prices surged, which could hurt demand later down the line.
Today the pair is holding steady as attention turns to eurozone wholesale inflation (PPI) data, which is expected to show that prices rose to a record high. PPI is considered a lead indicator for consumers’ prices so a high reading could fuel bets of a more hawkish ECB and lift the euro.
| EZ composite PMI March
EZ producer price Feb YoY |
Actual: 54.9 (0.6)
Expected: 31.6% (1%) |
Previous: 55.5
Previous: 30.6% |
Where next for EUR/GBP?
After hitting resistance at 0.8525, EUR/GBP has extended its fall lower, pushing below the 50 sma and the 100 sma.
The bearish crossover on the MACD suggests that there is more downside to be had. Sellers will need to break below 0.8330, which has so far acted as a floor this week. A break below here could open the door to 0.83 round number with a break below here forming a lower low.
On the upside, any recovery would first need to close above the 50 sma at0.8370 to expose the 100 sma at 0.84
Natural gas rises to a 5-month high on EU sanctions.
Natural gas jumped to its highest level in 5 months amid growing supply concerns.
Last week President Putin threatened that Russian gas would need to be paid for in Rubles or he would cut off supply. Europe continued to pay in euros without consequences.
While the European Union has been weighing up banning Russian energy imports since the start of the war, the atrocities committed by Russian forces in Ukraine have prompted the EU to impose new sanctions, including a ban on Russian coal imports, sending gas demand higher and prices to levels last seen in October last year.
Gold falls ahead of FOMC minutes.
After rising to a high of 1945 in the previous session, Gold prices pared gains and ended the session 0.5% lower at 1920.
While safe-haven flows had boosted the precious metal as geopolitical tension escalate in eastern Europe, rising expectations of a more hawkish Federal Reserve raised the USD and pulled gold lower.
US data showed that service sector activity increased in March, along with new orders and employment in the dominant service sector, suggesting that the US economy is strong. US Fed speakers were also more hawkish, with Brainard hinting that inflation at current levels required a stronger approach from the Fed.
Today Gold is falling ahead of the minutes from the latest Fed meeting which are due later. Gold could fall further if the minutes show a Fed that is prepared to act more aggressively to tighten monetary policy
| US ISM services March | Actual: 58.3 (2%) | Previous: 56.5 |
Support can be found at 1915 (weekly low) and 1907 (March 15 low).
Resistance for the pair can be seen at 1942 (20 sma) and 1966 (March 25 high).
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