The European Central Bank hiked interest rates by 50 basis points on Thursday and signalled at least one additional 50 basis point hike, as the central bank remains focused on controlling inflation despite recent data that suggests inflation may have peaked in the Eurozone. Analysts predict the ECB will eventually raise rates to between 3.25% to 3.75%.
ECB President Christine Lagarde stated that the ECB will continue its current monetary policy tightening cycle, as inflation remains “way too high”. The ECB plans to raise interest rates by another 50 basis points in March and then assess the future monetary policy path.
The International Monetary Fund (IMF) has urged central banks to “communicate the likely need to keep interest rates higher for longer” to bring inflation back to target. The ECB has been increasing rates at a rapid pace to address rising inflation, which is a result of factors including the aftermath of the COVID-19 pandemic and the energy crisis following Russia’s invasion of Ukraine.
Recent economic data has eased some of the concerns, as price growth in the Eurozone slowed more than expected in January, according to figures from the European Union’s statistics office, helped by the mild winter and lower energy prices.
Despite higher borrowing costs, the Eurozone’s economy has proven to be broadly resilient and unexpectedly grew in the fourth quarter, defying expectations that the ECB’s aggressive rate hikes in 2022 could trigger a recession in the near term.
QoQ growth for Q4 2022 came at 0.1%, and the headline inflation reading of 8.5% last month is still above the ECB’s 2% target. Headline inflation has been declining since peaking at a record 10.6% in October but core prices, which exclude volatile items such as food and fuel, have been rising at a steady pace.
ECB officials will have a chance to gather further inflation numbers before they make their next policy decision in March and were more hawkish compared to commentary by the U.S. Federal Reserve and the Bank of England, which was perceived by investors as dovish.
However, the ECB’s comments did not deliver new hawkish surprises and investors continued to be hopeful the hiking cycle could end soon, despite President Christine Lagarde pushing back against such narrative.
On Thursday the DAX 40 index hit its highest level in a year, despite hawkish messages from the European Central Bank. Investors seemed to be of the view that inflation would continue to fall in a meaningful way and hoped the central bank might not pursue its aggressive hiking cycle.
The DAX 40 surged on Thursday posting a high of 15,520 a level not seen since 16th of February 2022. While the rally from the September 2022 low is still intact at this juncture in time we note the formation of a bearish divergence from overbought levels between the price and the Relative Strength Indicator.
Given the proximity to the previous all-time high of 16,285 which acted as a strong resistance and the overbought and diverging momentum conditions, we are of the view that the near-term upside from here is likely to be limited and the index is vulnerable to a pull back in the short-term.
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Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.
Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.
Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.
Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.
Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.
È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.
Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.