Rally stalls amid uncertainty over interest rates and the economy

European markets are in the red on Thursday in what continues to be a choppy week of trading driven by economic and interest rate uncertainty.

We’re now at a pivotal point in the tightening cycle, one made all the more difficult by the mini-banking crisis last month and the ripple effects it will have on credit and the economy over the course of the rest of the year.

Central banks, the Fed in particular, are now at even greater risk of overtightening just as the data may show price pressures easing considerably. The fear of that not materializing will probably drive another round of rate hikes next month, after which discussions will likely be far more balanced.

It’s this uncertainty that appears to be driving the most recent period of choppy trading, especially when the economic data is not yet playing ball; the UK this week is a prime example of that. Justifying a pause in tightening when inflation is above 10% on the belief it will fall rapidly after being terribly wrong about it being transitory not long ago is tough and I’m not convinced central banks have it in them or feel there’s enough credit in the bank to take the risk. It’s going to be an anxious couple of months.

The ECB decision-making is made slightly less complicated by the fact that interest rates haven’t risen quite as far after being so late to the party and the minutes may well reflect that. Of course, they may also highlight anxiety within the committee in relation to the proximity of the meeting to those bank failures.

.

EUR/USD Technical

Are we finally seeing profit-taking in bitcoin?

Bitcoin is slipping again on Thursday after breaking back below $30,000 a day earlier, following a few choppy days of trade. It’s now seeing some support around $29,000 where it saw resistance in late March and early April but after such a prolonged rally since early January – more than 80% – the recovery may be running on fumes.

.

BTC/USD Technical

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.