The euro bounce is being partially erased (Daily analysis 21.03.2022)

Over the past week, financial markets have been trading under the influence of a growing belief in an imminent ceasefire. Although an agreement was reported by The Financial Times as early as mid-week, diplomatic talks still do not have a positive conclusion and will continue today.

From this perspective, an upsurge of nervousness seems natural. It drags down the main currency pair EUR/USD towards 1,10 and results in EUR/CHF declining below 1,03. Both tendencies should not prevail, and we perceive them as moves of a corrective nature.

Dollar: a bunch of FOMC members' speeches

Last week, the Federal Reserve raised interest rates for the first time since 2018 and announced that up to six more moves are to come. Instead, investors received relatively little new guidance on the details of the plan to reduce the balance sheet, which has been bloated from around 4 to almost 9 trillion USD as a result of the strong response to the pandemic collapse in growth. It should be assumed that the quantitative easing process will be announced in the second quarter. Its pace will be a key variable, not only for the bond market and the dollar but also for Wall Street and global equity trading floors. Investors will be looking for clues as to the views of individual policymakers in a series of public speeches. This week, as many as 12 FOMC members will speak 18 times!

Attention will also focus on PMIs, which on Thursday will show how the Russian invasion and turbulence in the financial markets affect perceptions of the main economies' economic outlook. Tuesday will bring another interest rate hike in the region - this time, Hungary will raise the cost of money. In recent months, the weekly deposit rate has become more important than the main interest rate. On Thursday, it will be raised above the 6% ceiling. The forint in the previous weeks behaved almost identically to the zloty or the Czech koruna.