FOREX-Euro stabilizes after ECB pushback, dollar waits ahead of US CPI

Band Joice Alves

LONDON, February 9 (Reuters)The euro stabilized on Wednesday from a three-week high after European Central Bank President Christine Lagarde cut bets for aggressive interest rate hikes.

The dollar was flat, a day before the release of consumer price data in the United States that could offer new clues on the pace of monetary tightening by the Federal Reserve.

A more hawkish tone from the ECB and the Fed last week caught markets off guard and sent Eurozone and US debt yields higher as higher betting rates could rise further. quickly and higher than expected.

But Lagarde said on Monday that a major tightening was unnecessary, trying to temper rising expectations for aggressive action after first signaling last week that a rate hike this year was a possibility.

The euro edged up 0.1% to $1.1425 by 0850 GMT, following its gradual pullback from a high of $1.1483 on Friday when it hit its highest level since January 14.

The dollar index =USD, which measures the greenback against six major peers, was also little changed, down 0.1% to 95.504, after bouncing off a 2.5-week low of 95.136 hit on Friday. It hit the highest since July 2020 at 97.441 late last month.

“We view these types of moves as short-term volatility, although profitable if played well,” said Jens Nærvig Pedersen, chief FX and rates strategy analyst at Danske Bank, recalling the highs and lows of the market. dollar and euro over the past. two weeks.

“We expect the data (on US inflation) to support expectations of Fed hawkishness,” he said, adding that rate hike expectations will support the strengthening US dollar in the coming months. over the next few quarters.

Markets are pricing in more than a 70% chance of a 25 basis point hike from the Fed and nearly a 30% chance of a 50 basis point hike when policymakers meet in March, the tool says. CME’s FedWatch.

“Tomorrow’s release of the US CPI will help determine whether the Fed starts with a 25 basis point or 50 basis point move in March,” ING strategists told clients.

Economists polled by Reuters predicted U.S. data on Thursday would show consumer prices rose 7.3% year-on-year in January.

World exchange rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by Joice Alves Additional reporting by Kevin Buckland Editing by Peter Graff)

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