The euro fell on Friday after European Central Bank officials sent various policy signals, but expectations of a 50 basis point rate hike from the Federal Reserve are temporarily new for 25 months. Supported the high-priced US dollar.
ECB Governor Christine Lagarde said the central bank’s growth outlook will shrink the day after ECB dove Luis de Guindos joins policymakers calling for an early termination of the bank’s asset purchase scheme, coupled with a rate hike in July. He said it might be necessary and made a dovish tone. ..
These mixed signals contrasted with the clear message of Fed Chair Jerome Powell on Thursday.
“To convince the market in the long run, all ECB members need to work together. Occasional volatility is likely, but these will return to a stronger US dollar,” Berenberg Forex and Interest rate adviser Moritz Paysen said in a research note.
Monetary policy outlook is a major subject of the currency market, as interest rate channels affect the relative performance of currencies.
“Yesterday, the euro rose after several ECB members reportedly accepted a rate hike in July, but Lagarde’s comments remained uncommitted,” said Mathew Ryan, senior market analyst at Evry. Said.
“Frankly, I think the ECB’s risk is far behind,” he added.
Friday’s PMI data showed a sharp increase in activity in the Eurozone services sector while manufacturers struggled.
The euro fell 0.1% against the US dollar to $ 1.0822, and the dollar index rose 0.2% to 100.84 after reaching 101.06, the highest since March 2020.
Investors are waiting for Sunday’s final vote in the French presidential election between incumbent Emmanuel Macron and the right challenger Marine Le Pen. The latest polls show that Macron won with 55% of the votes.
Sterling fell against the dollar to its lowest since November 2020, after sales data and recent Bank of England comments suggested a possible slowdown in the expected monetary tightening path.
“(BoE Governor Andrew) Bailey was cautious about raising interest rates and seemed more concerned than the market expected about the potential recession and the risk of a slowdown in the labor market,” Evry’s Ryan argues. bottom.
“The pound sterling is another currency we are paying attention to and we may have to renew our view of the downside,” he added.
Commodity currencies were in the negative territory, and Friday’s oil prices widened losses as interest rates were expected to rise, global growth slowed, and the blockade of COVID-19 in China hurt demand.
The Australian dollar and the Kiwi dollar fell about 0.8% to $ 0.731 and $ 0.688, respectively, and the Norwegian krone fell 0.2% to $ 8.928 per dollar.
China’s offshore yuan has fallen 0.9%, and London’s trade has hit a 12-month low of 6.548 yuan per dollar, marking the worst week in more than two and a half years.
Market participants wondered if this fall was a policy response to counter the slowdown.
Deutsche Bank analysts said COVID-19 remains the most significant downside risk to China’s short-term growth outlook, “the yuan is likely to face downward pressure in the coming quarters.” ..
The Japanese yen was flat against the dollar at $ 129.37, but is just around the lowest since April 2002, which was hit on Wednesday as the central bank stuck to super-simple monetary policy.
Stefano Rebaud
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