Euro managed to recover. Overview for 09.09.2022

The market major recovered quite noticeably. The current quote is 1.0100.

The European Central bank raised the interest rate by 75 base points at once, bringing it to 1.25% a year. This result of the meeting was anticipated but not the most looked forward to one.

In the comments, the ECB mentioned that the growth of inflation pressure was provoked, among other things, by the weakness of the EUR. Future interest rate decisions will depend on macroeconomic factors, and the new increase will not necessarily be by 75 base points. Inflation called for decisive measures but the economy might later do without them.

The current rate is not neutral; later on, lifting it to a neutral one will be necessary.

As for the situation in the economy, the ECB mentioned that the GDP was likely to shrink in 2023, and the perspective is, indeed, quite gloomy. The ECB goes on stimulating the economy, but in the future something will need to be decided about TLTRO and other support measures.

Then attention shifted to the Fed. The head of the regulator Jerome Powell mentioned that the Fed would be doing everything to fight with inflation. His speech made the market expect the rate to be lifted by 75 base points in September. According to CME, the probability of such a decision is no less than 80%.