ECB helped euro hit 9-month high
2023.01.23 08:58
ECB helped euro hit 9-month high
By Ray Johnson
Budrigannews.com – On Monday, comments suggesting additional jumbo interest rate rises in Europe contrasted with market pricing for a less aggressive Federal Reserve, causing the euro to reach a nine-month high against the dollar.
The euro traded at its highest level since April of last year, breaking the previous high of $1.08875. At $1.0878, it was up 0.2 percent.
Klaas Knot and Peter Kazimir, members of the European Central Bank (ECB) governing council, pushed for two more 50 basis point increases at meetings in February and March, which helped the single currency.
Analysts polled by Reuters also wanted rate hikes of 50 basis points at the next two meetings and a final rate peak of 3.25 percent, up from the current 2%.
According to Jane Foley, head of currency strategy at Rabobank, a decrease in prices was also bolstering the euro and easing concerns about a recession.
Foley stated, “Part of the euro story is the growth in confidence in the economic outlook, or at least the removal of a lot of the pessimism.”
Foley went on to say, “Layed on top of that, it looks like the ECB are going to continue hiking interest rates fairly aggressively.”
Contrarily, futures have steadily lowered the likely peak for rates from the current 4.25% to 4.50% and priced out almost any possibility that the Fed could move by 50 basis points next month.
Due to weaker data on inflation, consumer spending, and housing, investors have also priced in roughly 50 basis points of U.S. rate cuts for the second half of the year.
In light of falling energy costs, it is anticipated that this week’s flash surveys on January economic activity will show greater improvement in Europe than the United States.
According to NAB’s head of FX strategy Ray Attrill, “The U.S. has lost its global growth leadership position if most recent PMI surveys are to be believed.”
He went on to say, “In addition, U.S. inflation is seen falling further and faster than the Fed’s own projections.” The USD could fall even further this year under this scenario.”
The, which compares the dollar to a basket of currencies, including the euro, was unchanged at 109.96, just a hair above its eight-month low of 101.510.
After the Bank of Japan (BOJ) defied market pressure to reverse its ultra-easy bond control policy last week, the dollar strengthened against the yen.
Analysts anticipate that the BOJ will maintain its stance until at least the March policy meeting, despite the likely naming of a new governor in February.
Following last week’s wild gyrations between 127.22 and 131.58, the dollar was up 0.6% at 130.345 yen.
Prior to Wednesday’s Bank of Canada interest rate decision, the Canadian dollar was slightly firmer at $1.3354 per US dollar, with markets anticipating a quarter-point increase to 4.5 percent.
The pound reached its highest level in seven months at $1.24475 before falling 0.3 percent to $1.2355 later on.
More:
Dollar continues to weaken due to actions of Fed
Argentina and Brazil will create a single currency
