The end of the first week of November saw above-average volatility in the financial markets, possibly related to rumors about the lifting of China's anti-Covid policy. China's economy seems to be suffocated by restrictions, and the lifting of the zero Covid policy could lead to faster growth in China.
EUR/USD exchange rate
The financial market seemed to react with euphoria to this rumor, which could lead to a weakening of the USD against the Chinese yuan in particular, as well as to increases in the EUR/USD exchange rate. As a result of the weakening dollar, we could also see commodity prices rise, including silver, which jumped more than 6 percent, surpassing $20 per ounce. China, however, dismissed the aforementioned rumor over the weekend, leaving its restrictive approach to the outbreak. This, however, seems to have failed to change the positive sentiment.
Source: Conotoxia MT5, EUR/USD, Daily
The euro approached parity with the US dollar, extending the gains above the $0.99 level. This may also be related to expectations that the European Central Bank would further tighten monetary policy to counter high inflation. Last week, President Lagarde said the bank should continue to raise interest rates even as the likelihood of a recession in the eurozone increased. Recent data showed that inflation accelerated to a new record of 10.7 percent in October. The rise in inflation, the data showed, is being driven by energy and food prices. At the same time, GDP growth in the region slowed to 0.2 percent in the July-September period. This was the weakest growth in six quarters.
Statements important for the euro exchange rate
Bank of France Governor Francois Villeroy de Galhau said Monday that peak inflation in the eurozone should be reached in the first half of 2023. The impact of the energy crisis on overall price growth "will fade starting probably next spring," he - A member of the European Central Bank's Governing Council, quoted by the BBN website, told The Irish Times. He also called for interest rate hikes to continue until it is clear that core inflation has peaked, but declined to predict where final rates will be. "Our goal is not to trigger a recession, but to tame inflation." - Villeroy de Galhau stressed.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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