FOREX-Euro Settles Near One-Month High After Inflation Shake


Band Saikat Chatterjee

LONDON, September 1 (Reuters)The euro consolidated gains below a nearly one-month high on Wednesday as higher than expected inflation pushed bond yields higher, forcing investors to hedge their bearish bets on the single currency.

Data on Tuesday showed eurozone inflation rose to 3% year-on-year in August, the highest in a decade, above the European Central Bank’s 2% target and forecast 2.7% in a Reuters poll. The reading sent German benchmark debt yields to their highest levels since late July. GVD / EUR

Rising bond yields have forced traders to halt their multi-month buying streak in US dollars against the euro. Net short bets against the greenback against the single currency have fallen to their lowest levels since March 2020, according to the latest positioning data. EURNETUSD =

Implied volatility gauges on the single currency EUR1MO = also faltered, with one-month maturities hitting their highest levels since early July as expectations grew that the ECB could signal a policy change at a meeting next week.

Robert Holzmann, governor of Austria’s central bank, said the ECB was in a situation where it might think about cutting emergency bond purchases, and added that he expected the matter be discussed during the meeting.

But despite hawkish comments and the data, the single currency hasn’t made much headway above the $ 1.18 level. At the start of trading in London, the euro EUR = EBS held at $ 1.1803, below an August 5 high of $ 1.1842 hit Tuesday after the data.

Analysts believe the euro’s lack of sustained strength is based on current ECB forecasts which suggest asset purchases will continue until rate hikes are needed, indicating that the stimulus program could be extended next year.

“Unless eurozone economic data points to continued upside surprises in the coming months, it’s hard to get excited about a persistent eurozone rate hike and, by extension, a strong uptrend in the euro / dollar, “Credit Suisse strategists said in a daily. note, stick to their year-end forecast of $ 1.16.

Elsewhere, the dollar was slightly higher against its rivals, thanks to a mix of weak Asian factory activity data and firmer yields from the US Treasury.

The dollar index = USD, which measures the greenback against six rivals, climbed to 92.777 from Tuesday, when it fell to 92.395 for the first time since Aug.6.

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(Reporting by Saikat Chatterjee; editing by Pravin Char)

(([email protected]; + 44-20-7542-1713; Reuters messaging: [email protected]))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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