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We will have enough data by April to determine if we need to actOr we can decide to wait and see for further developmentsEvery passing day of the conflict contributes to an increase in inflationary risksA rate hike in April is certainly an option, but that is just one option on the tableThe pressure is certainly on for the ECB, as key energy facilities in the Gulf region continue to be impacted by the US-Iran conflict. The good news this week is that the price for Dutch TTF gas futures has come off the boil at least. However, it is still holding at a level well above the ECB staff projections.And with the central bank already sidelined amid more stubborn inflation pressures before the Middle East crisis, the latest developments in the past weeks just piles on top of that.At the end of February, market players were not expecting any rate changes by the ECB whatsoever for this year. Currently, we’re seeing ~74 bps of rate hikes priced in by year-end.The odds of a rate hike in April are at ~66% currently. And if not by then, the next meeting in June sees a 25 bps rate hike fully priced in already now. So, that is the backdrop that the ECB will be working with in the weeks ahead.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
Inflationary risks are rising, and here’s why traders should care: The ongoing conflict is creating uncertainty that could push central banks to act sooner than expected. With a potential rate hike on the table for April, traders need to monitor economic indicators closely, especially inflation data. If inflation continues to climb, it could trigger a shift in monetary policy that impacts forex and crypto markets alike. Look for key levels in major currency pairs and crypto assets that could react to these developments. But don’t overlook the possibility of a wait-and-see approach from policymakers. If they choose to hold off, it could lead to a temporary relief rally in risk assets. Keep an eye on the volatility index and any shifts in sentiment among institutional players, as they might provide clues on market direction. The next few weeks are crucial, so traders should be prepared for rapid changes based on incoming data and geopolitical developments.
📮 Takeaway
Watch for inflation data leading up to April; a rate hike could shift market dynamics significantly, impacting both forex and crypto positions.
