EUR/USD Outlook: ECB’s Kazaks Eyes 2 to 3 Hikes, Tech Levels Updated
Apr 26, 2022 4:30 PM +05:00
ECB Kazaks views 2 to 3 rate hikes in 2022 as “quite reasonable”
US PCE and EU inflation data on the horizon
ECB KAZAKS IN FAVOR OF 2-3 HIKES IN 2022
Martins Kazaks, Latvia’s central bank governor has expressed that a view to hike 2 to 3 times this year is “quite a reasonable view to take”. He added, “a rate rise in July is possible” but qualified his statement saying that its immaterial whether the first hike is in July or September but prefers July. Kazaks is considered to be one of the slightly hawkish governing council members of the ECB and joins calls by other members to promptly end asset purchases and begin hiking rates in a bid to calm inflation.
Growth Concerns Confirmed by the IMF
The ECB’s ‘gradual’ approach to phasing out its Asset Purchase programe (APP) coupled with what is likely to be a 50 basis point hike from the Fed next week, places the euro in a tough spot. Not only that, the IMF revised its 2022 Euro zone growth projections lower, from 3.9% to 2.8% with Germany accounting for a large share of the weaker outlook.
Germany is the EU’s largest economy which is seen dropping 1.7% in expected, GDP growth in 2022. In contrast, the US is only expected to drop 0.3% from the January GDP growth forecasts, coming in at 3.7% for the year. All figures refer to real GDP (expected nominal GDP – expected inflation)
Interest Rate Differential set to Widen Further
According to current expectations derived from the Federal fund’s futures market, the market expects an additional percentage point rise in the Fed funds rate before the ECB could achieve lift-off on July 21st – the date that is being eyed for the ECB’s first rate hike in years.
