Lagarde’s remarks ignite the markets… the euro is at a 9-month peak and the dollar is suffering By Investing.com

Lagarde’s remarks ignite the markets… the euro is at a 9-month peak and the dollar is suffering By Investing.com
Lagarde’s remarks ignite the markets… the euro is at a 9-month peak and the dollar is suffering By Investing.com
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© Reuters

Investing.com – The consolidated gains widened as ECB officials continued to say that the pace of tightening will continue until record inflation rates are eliminated.

Meanwhile, the US dollar’s losses widened against the basket of major currencies, in which the euro accounts for approximately 56% of the total relative weight of the basket.

Lagarde said financial markets should “revisit” that the European Central Bank will soon slow its rate increases.

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The increase continues

European Central Bank President Christine Lagarde reiterated that ECB rates should rise significantly and at a steady pace in the coming period.

Christine Lagarde said, “The European Central Bank will continue to raise interest rates quickly to slow down inflation, which is still very high.”

“In other words, we will continue on the path of rate hikes to ensure that inflation returns to our target,” added ECB President Christine Lagarde.

The annual inflation in the euro area reached 9.2% last December, compared to 10.1% in November, but it is still much higher than the target of 2%.

market now

During today’s trading, the dollar hovered near its lowest level in nine months against the euro, and gave up its recent gains against the yen.

This comes at a time when traders are assessing the prospects of a recession in the US, as well as the Federal Reserve’s interest rate path.

The dollar index, which measures the US currency against a basket of six other currencies including the euro and the yen, fell 0.3% to 101.8, and is set to return to its lowest level in seven and a half months that it hit last week.

The euro rose 0.2 to $1.090, approaching Monday’s peak at $1.0927, which was the highest against the US dollar since last April.

On the other hand, it recorded levels of 129.85 yen per dollar after two sessions of strong gains, and the pound increased 0.25% to 1.24 dollars.

The single European currency is receiving support from comments from European Central Bank officials that point to more aggressive monetary tightening in the coming period.

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It takes some time

“It will take several months before core inflation falls to levels that make the ECB more comfortable,” said Frederic Ducrozet, chief economist at Pictet Wealth Management.

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“Almost all ECB officials seem united in their fight against inflation, doves and hawks alike,” he added.

Federal and European

The Federal Reserve and European Central Bank have raised interest rates rapidly since last year to curb inflation, which they initially described as “temporary”.

The two central banks are assessing the amount of additional pressure on their economies, which will be complicated by the delayed effects of the tightening on the economy.

Most of the officials indicated their support for the US central bank to shift from a half point increase to 0.25 percentage point, contrary to the ECB’s expectations.

The majority also expects the US federal funds rate to peak at between 5% and 5.25%, suggesting a quarter-point rate hike after the February move, and cuts are not expected until 2024.

The European Central Bank raised interest rates by a total of 2.5 percentage points last year to combat rising prices, when inflation hit an all-time high of 10.6% in October.

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