The Week Ahead – Rate hike pause remains conditional

EURUSD holds as ECB to keep smaller upsides

The euro is rallying as the momentum of high price growth guarantees more tension. The ECB projects an extended disinflationary process as price pressures have turned after double-digit readings last year. However, chief economist Philip Lane expects price momentum fueled by wage growth to keep inflation above the bank’s 2% target for years. Other officials echoed this view and led the market to believe that the ECB could continue with 25 bp increases in the summer. This would allow the central bank to monitor economic data and adjust its policy accordingly. 1.1250 is the next resistance and 1.0800 fresh support

USDCAD rebounds as Canadian inflation in focus

The Canadian dollar recouped losses after the Bank of Canada left the door open for further rate hikes. BoC Governor Tiff Macklem has stated that the central bank is prepared to raise rates if inflation remains persistently above the 2% target, meaning this week’s CPI will carry considerable weight. March’s reading fell to 4.3%, almost half of its peak of 8.1% last year, and if the decline continues, the BoC could stay on the sidelines. However, a top surprise would raise bets for more political tension, boosting demand for the loonie and sending the pair lower. 1.3300. 1.3650 is the nearest resistance.

AUDUSD stabilizes as inflation may continue

The Australian dollar inches higher as the RBA may remain hawkish amid persistently high inflation. In its 2023 federal budget announcement, the government pledged $10 billion in cost of living. But with inflation still near its 30-year high of 7.0%, this feels like a double-edged sword. The market is concerned that such thinly veiled fiscal easing would run counter to the central bank’s monetary tightening, putting more pressure on the latter to raise rates. An assertive RBA meeting minutes after a surprise hike and robust jobs data may offer support to the Aussie. 0.6900 is a key resistance and 0.6600 the first support.

SPX 500 stabilizes as recession worries ease

The S&P 500 grinds higher as the US economy could reach the “soft landing”. A string of weaker data could be a boon for the risk asset. The Fed wants to see the economy cool and slower consumer price growth and higher claims for unemployment benefits go their way. However, the rebound may not be a smooth road. Investors may refrain from being overzealous due to ongoing concerns about the health of the regional banking industry. Meanwhile, the US debt default is unlikely to result in a default, but may keep price action choppy. 4300 there is a significant ceiling ahead and 4000 the closest support.

Test your strategy on how the GBPUSD will fare with Orbex

OPEN A LIVE ACCOUNT