Dollar Slides, Euro Jumps on ECB’s Warmongering Stance By

© Reuters.

By Peter Nurse – The U.S. dollar weakened in early European trading on Monday, while the euro hit a three-week high as traders reassessed the European Central Bank’s interest rate path at following last week’s very sharp rate hike.

As of 03:05 ET (07:05 GMT), the , which tracks the greenback against a basket of six other currencies, was trading down 0.8% at 107.912, falling off the 20-year high of 110, 79 observed last week.

Last week the key was lifted to 0.75% from zero, its biggest rise on record, and chairwoman Christine Lagarde guided two or three more hikes in a bid to bring the target back to record lows. of 2% of the bank.

This expectation of further aggressive monetary tightening pushed the euro higher against the dollar, rising 1.2% to 1.0154, close to its highest level in three weeks.

“Thursday’s step was a clear sign and if the inflation picture remains the same, further clear steps must follow,” Bundesbank President Joachim Nagel said in a radio interview on Sunday.

ECB officials see a growing risk of having to raise their key rate to 2% or more, or at least another 125 basis points of hike, to rein in record inflation in the euro zone despite a likely recession, Reuters reported. Monday.

The single currency was also boosted by news of substantial territorial gains made by Ukrainian troops over the weekend, raising the potential, however remote, for a quick end to Russia’s invasion of Ukraine.

Elsewhere, it rose 0.7% to 1.1667, building on gains in the euro against the dollar, although the latest economic data showed it rose less than expected in July as it had increased by 0.2% compared to June.

fell 0.6% in June, which included two days of public holidays to celebrate 70 years of the late Queen Elizabeth on the British throne.

However, it rose 0.3% to 142.95, returning to last week’s 24-year high just below 145 as the yen remained rate sensitive.

The market meets next week and is widely interest in a substantial amount once again.

Fed Governor Christopher Waller said on Friday he supported “a significant increase at our next meeting,” and St. Louis Fed President James Bullard called for another 75-point hike. base, which would be the third consecutive increase of this size.

Risk sensitivity rose 0.5% to 0.6872 as it traded at 6.9265 as the yuan remains weak as COVID-19 related lockdowns continue to threaten a sharp cut in output in the world’s second largest economy.

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