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Euro Extends Rally, Market Turmoil Eases

By MarketPulse (Kenny Fisher)CurrenciesMar 21, 2023 07:02AM ET

www.investing.com/analysis/euro-extends-rally-market-turmoil-eases-200636460

By MarketPulse (Kenny Fisher) | Mar 21, 2023 07:02AM ET

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EUR/USD

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The euro has put together a 3-day rally and is up again on Tuesday. In the European session, EUR/USD is trading quietly at 1.0756, up 0.30%.

Financial markets settle down

Let’s start with some good news. European stock markets have settled down and are in positive territory. Last Wednesday, the euro took a bath and plunged 1.47% as Credit Suisse shares tumbled, but the currency has battled back and recovered these losses. The emergency takeover of Credit Suisse by UBS and the joint announcement by six major central banks to boost liquidity have provided some reassurance to the markets that the banking system is not in danger of collapse.

That’s not to say that this nasty bank crisis is behind us. Investors are still trying to come to terms with the lightning collapse of three US banks and Credit Suisse Group (NYSE:CS), the second-largest bank in Switzerland, all in just 11 days. Another US bank, First Republic Bank (NYSE:FRC), received an emergency injection of $30 billion from some major US banks, but this may not prove to be enough, as depositors are estimated to have removed $89 billion and the bank’s shares are in freefall.

In light of the bank crisis, central banks will have to weigh their moves carefully and re-evaluate rate policy. The ECB didn’t flinch and delivered a 50-basis point move as promised. Had the ECB decided not to go ahead with the 50-bp hike, it risked losing credibility. As well, the ECB’s primary focus remains containing inflation. The ECB needed another oversized rate hike with eurozone inflation running at an 8.5% clip.

Could the financial crisis turn out to be a blessing in disguise? Perhaps, according to ECB President Lagarde. On Monday, Lagarde told European lawmakers that market turmoil could dampen demand and “might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes”. Lagarde reiterated that more rate hikes were needed to curb inflation, but didn’t make any commitments as to the pace of rate hikes, which makes sense, given that the current crisis is not over.

EUR/USD Daily Chart

EUR/USD Technical

EUR/USD is putting pressure on resistance at 1.0778. Next is 1.0890
There is support at 1.0647 and 1.0535

Original Post

Comments (1)

EUR/USD Holds Above 1.0700 in Low-Volume Session By Alex Boltyan - May 30, 2023

The EUR/USD pair continued to edge lower on Monday, although trading ranges are minimal given the holiday in the United States and Europe. At the time of writing, the EUR/USD pair...

New Zealand Dollar Stems Nasty Slide By Kenny Fisher - May 29, 2023

US markets closed for a bank holiday New Zealand dollar steadies after a 3.6% plunge last week US inflation is higher than expected The NZD/USD has stabilized on Monday after a...

EUR/USD Turns Green but Not Bullish Yet By Trading Point - May 29, 2023

EURUSD switched to recovery mode after its bearish wave from a one-year high stabilized around a two-month low of 1.0700 on Friday. Interestingly, the 61.8% Fibonacci retracement...

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Nikunj Thakkar Mar 21, 2023 7:40PM ET

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Euro Extends Rally, Market Turmoil Eases

Financial markets settle down

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