EUROPEAN STOCKS RETREAT AS US WARNS OF RUSSIA-UKRAINE CRISIS

European stocks moved sideways as tensions between Russia and Ukraine rose. In Germany, the DAX index rose by about 15 points while in the UK, the FTSE 100 index declined slightly. In a statement, the State Department warned that Russia could soon invade Ukraine. The department cited the rising number of Russian troops near the border. At the same time, Russia and Belarus have been accused of helping to flood Europe with migrants. As such, there is a likelihood that the two allies will coordinate in a bid to lower gas supplies from Russia. Indeed, the price of natural gas has risen close to an all-time high.

The euro continued its downward momentum as concerns about inflation jumped. The EURUSD crashed to the lowest level since July 2020. Recent numbers have shown that inflation in Europe has kept surging in the past few months. But there are also signs that Europe’s inflation is diverging. For example, in Estonia, inflation has risen to 4% while in Greece, it is about 0.1%. Data published by Destatis on Thursday showed that consumer prices rose by 4.5% in October, the fastest pace in more than 3 decades. And today, data by the Spanish statistics bureau showed that inflation has jumped to 5.4%. Therefore, there are concerns about how the ECB will address this divergence.

The Swiss franc wavered slightly after the latest Swiss producer price index (PPI) data. According to the country’s statistics agency, PPI rose from 0.2% in September to 0.6% in October. This growth led to a year-on-year increase of 5.1%, the highest it has been since 1990. Therefore, there are concerns about whether Swiss producers will push these price increases to customers. Recent data showed that the country’s consumer inflation is less than 2%.

USDCHF

The USDCHF pair is trading at 0.9220, which is a few pips below the weekly high of 0.9230. On the four-hour chart, the pair is slightly below the upper side of the Bollinger Bands. It has also moved close to the 50% retracement level. The pair is also slightly above the 25-day moving average while the Relative Strength Index (RSI) has moved above the overbought level. Therefore, the pair will likely end the week in this range and then have a pullback next week.

EURUSD

The EURUSD pair has continued its downward trend as worries of inflation rise. The pair is between the descending channel shown in green. It has also formed a death cross, which happens when the 50-day and 200-day moving averages make a crossover. The MACD has also moved to the lower side of the channel. Therefore, the pair will likely keep falling as bears target the key support at 1.1200.

UK100

The FTSE 100 index declined to a low of 7,344 as worries of energy jumped. This price was relatively lower than this week’s high of 7,395. On the four-hour chart, the index is still above the short and long-term moving averages while the MACD is above the neutral level. Therefore, the index will likely drop some more because of rising inflation worries.