Euro holds above two-decade low before ECB decision

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Euro holds above two-decade low before ECB decision

By 0747 GMT, the euro was down 0.3% at $0.99795.

London-

The euro was hovering above Tuesday’s two-decade low on Thursday as investors awaited a policy decision from the European Central Bank (ECB) and comments from the Federal Reserve Chairman for an insight into the path of global monetary tightening.

The European Central Bank is expected to raise interest rates by 75 basis points, bringing the deposit rate above zero for the first time since 2012, but the option to raise interest rates by 50 basis points has not been ruled out.

“We expect the ECB to do just 50 basis points today, instead of the agreed view of 75,” said Chris Turner, head of markets at ING. “If that is the case, we believe that the EUR/USD will probably correct a pullback to around $0.99.”

By 0747 GMT, the euro was trading 0.3% lower at $0.99795, settling above its lowest level since late 2002 at $0.9864 as Europe’s energy crisis keeps the single currency under pressure and the dollar prevails as the Federal Reserve reiterates its commitment to cut inflation to Target. .

Fed Chair Jerome Powell is set to participate in a discussion at 1310 GMT — overlapping ECB President Lagarde’s press conference following the decision — and Fed officials are set to soon enter a blackout period ahead of the September 20-21 central bank meeting. .

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The Fed’s recent comments have continued to be hawkish in general.

On Wednesday, Boston Fed President Susan Collins said bringing inflation to 2% is the Fed’s “number one”, while Vice President Lyle Brainard said tight monetary policy would continue “as long as it takes to reduce inflation.”

Money markets are placing a 79% chance that the Fed will raise another 75 basis points at this month’s meeting, which will raise the fed funds rate to 3.0% to 3.25%.

The US dollar index, which measures the currency against six major peers, rose 0.1% to 109.82, after hitting a high of 110.79 on Wednesday, a level not seen since June 2002.

Sterling fell 0.4% to $1.1486, heading for a 37-year low the previous day at $1.1407, before new British Prime Minister Liz Truss announced her plans to tackle rising energy bills.

The Japanese yen showed some resilience on Thursday, trading little at 143.77 per dollar, after hitting a 24-year low of 144.99 in the previous session.

The yen has been a particular victim of the dollar’s recent strength, in part due to its sensitivity to higher long-term US yields with the Fed’s hawkish bets mounting and the Bank of Japan still dovish central bank.

“Continuing downward pressure on the yen has increased the likelihood of a policy change (from the Bank of Japan) later this year,” Goldman Sachs analysts said in a research note.

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“If the BOJ drops YCC (Yield Curve Control), the spreads against the US should stop widening, and the rally in USD/JPY should pause or reverse.

The Ministry of Finance said that officials from Japan’s Ministry of Finance, the Bank of Japan and the Financial Services Agency are meeting today to discuss global financial markets.

Meanwhile, the Australian dollar fell 0.5% to $0.67345, and earlier fell to a low of $0.6713, after Reserve Bank of Australia Governor Lowe said in a speech that “the case for a slowdown in the pace of interest rate increase becomes stronger as the level of liquidity ratio.

(Except for the headline, this story has not been edited by the NDTV crew and is published from a syndicated feed.)