The euro rose in early forex trading on Wednesday, breaking above par against the US dollar for the first time since mid-September. At 9:45 a.m., the common currency had risen to $1,0022. Market observers say the dollar is likely to suffer as weak US economic data could prompt the US central bank to raise interest rates more cautiously on the economy.
Investors increasingly seem to be anticipating that the pace of Fed tightening will soon slow down, UniCredit analysts wrote on Tuesday. In addition to the economic data, the decline in interest rates in the government bond markets also points to a waning expectation of rate hikes.
Stronger euro pushes fuel prices
Before that, the dollar had long benefited from the prospect of rising interest rates and had appreciated against the euro. The background to this is that the US central bank is expected to respond to high inflation with a faster course of rate hikes than its eurozone counterpart, the ECB.
The strength of the euro should satisfy motorists as the oil price is traded in dollars and a stronger euro will push fuel prices down. A strong euro generally makes imports cheaper, but makes exports less attractive.
ECB interest rate decision on Thursday
The break above parity could now boost buying interest in the euro, according to UniCredit analysts. Technically speaking, Helaba’s analysts also see the picture for the euro as positive at the moment. They find the next hurdles above parity at $1,0050 and $1,0093.
Thursday’s interest rate decision by the ECB should now give a major boost to currency trading. Analysts consider an interest rate hike of 50 or even 75 basis points to be practically predetermined.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
