Euro growing after release of positive economic data
2023.01.30 09:24
Euro growing after release of positive economic data
By Ray Johnson
Budrigannews.com – While the dollar remained near an eight-month low ahead of a slew of central bank meetings this week, expectations for a higher euro area print on Wednesday were raised by unexpectedly high Spanish inflation data on Monday.
After data showed that consumer prices in Spain increased by 5.8% in January compared to the same month last year, the first increase since July, the euro gained 0.2 percent to $1.0891. This increase was faster than the 5.7% year-over-year increase that was recorded in December.
According to Nordea’s chief analyst Niels Christensen:
“Today’s data will underline expectations for a 50 basis point hike from the ECB on Thursday and also signal that rates will be moved further up.”
The, which compares the currency to a group of other currencies, including the euro, was little changed at 101.88, having fallen to its lowest point in eight months last week at 101.50.
Expectations that the Fed is nearing the end of its rate-hike cycle and that interest rates would not have to rise as high as previously feared put pressure on it, which caused it to be down more than 1.6% in January and on track for a fourth consecutive monthly loss.
Prior to the Fed, European Central Bank (ECB), and Bank of England (BoE) policy meetings later this week, movements were still relatively muted.
Christensen of Nordea stated, “The euro has moved higher after the Spanish CPI data, but there is also risk-off sentiment which should be slightly positive for the dollar,” noting that equity futures were lower in the United States and Europe.
Christensen added:
“I don’t expect the euro-dollar to break higher today or tomorrow ahead of the Fed and ECB.”
Market observers predict that the BoE and ECB will each raise rates by 50 basis points, while the Fed is expected to increase rates by 25 basis points, a decrease from its previous increases of 50 and 75 basis points.
The euro is on track for a near-1.7 percent monthly gain thanks to the ECB’s ongoing hawkish rhetoric and waning concerns of a severe euro zone recession.
The Bank of Japan governor Haruhiko Kuroda stated on Monday that the central bank must continue its easy policy, which resulted in the yen falling 0.3% to 130.195 per dollar elsewhere.
After Australia’s inflation rate shot to a 33-year high last quarter, causing traders to increase bets that the Reserve Bank of Australia will have to tighten interest rates further, the Australian dollar fell 0.5% to $0.7071. However, it was on track for a monthly gain of nearly 4%.
The upcoming Tuesday release of China’s purchasing managers’ index (PMI) data will be the primary focus as the country returns from its Lunar New Year holiday.
Rodrigo Catril, a currency strategist at National Australia Bank (OTC:), stated, “So far, the data coming from China, or the vibes coming from China, do play to the view that a good reopening in terms of activity is likely to unfold.”
On Monday, investors rejoiced as robust holiday spending and tourism data pointed to signs of economic recovery. The soared against the dollar, rising roughly 0.5 percent to 6.7425.
