​EBC Markets Briefing | Euro weak; Xpeng shares jumped on VLA 2.0

The euro pared its earlier gains on Tuesday on speculation that the war in the Middle East could prove limited on Tuesday. Analysts warned earlier this week the price of oil could keep rising.

IMF Managing Director Kristalina Georgieva on Monday said a 10% increase in oil prices, ⁠if persistent through most of the year, would result in a 40-bp increase in global inflation.

Central banks across Europe came under bigger pressure to lift interest rates in this circumstance. Money markets ramped up bets on rate increases by the ECB and the SNB before year-end.

European central banks were late to raise rates four years ago when Russia's invasion of Ukraine unleashed an energy shock that quickly spilled over into broader consumer prices.

Traders have turned significantly pessimistic on the euro. In the options market, so-called one-week risk reversals show bearish sentiment on the common currency is now at levels not seen after the 2022 invasion.

Eurozone GDP growth for the last quarter missed expectations slightly, with the latest data showing a 0.2% expansion. Questions still remain about how threats from US tariffs will continue to play out.

The euro was stuck in a tight trading range over the past few sessions. With uncertainties of war lingering, it is expected to drop again towards $1.1570. A break above 200 SMA may be needed to resume uptrend.

Asset recap

As of market close on 9 March, among EBC major products, Xpeng shares led gains as it will begin nationwide test drives for its VLA 2.0 autonomous driving system, a crucial step for business development.

Oil prices have tumbled from four-year highs, capping an extraordinary 24 hours in global markets after Trump suggested the US-Israel war on Iran could end "very soon".

Moreover, G7 finance ministers are discussing a possible joint release of petroleum from reserves co-ordinated by the IEA. Easing concerns helped send Asian equity ETFs greatly higher.

EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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