Sunday, December 3, 2023

Euro bounces above $1.07 on Lagarde’s rate comments

He euro rebounded today until touching the level of the US$1,0750 after the improvement of the mood in the markets and aggressive comments from the president of the European Central Bank (ECB), Christine Lagarde, and soft, from members of the Federal Reserve (Fed).

The euro was exchanged around 15:00 GMT at $1,0731compared to US $ 1.0680 in the last hours of the European negotiation of the foreign exchange market of the previous day.

The ECB set the reference exchange rate for the euro at US$1.0697.

Mood has improved in international markets After the House of Representatives gave its support last night to the agreement to raise the debt ceiling in the United States, the legislative text now passes to the Senatewhich has until June 5 to approve the measure before the country defaults on its national debt.

Lagarde said that the ECB You must raise your interest rates a lot more because inflation is very high.

The inflation The general rate for the euro area decreased in May to 6.1% year-on-year, nine tenths less than in April, and the core, which excludes energy, food, alcohol and tobacco, to 5.3%, three tenths less.

But it is uncertain how strongly the monetary politics from the ECB to the real economy, according to Lagarde.

This is why the ECB needs to continue the bullish cycle until it is confident that inflation is on track to return to the 2% target on time.

If the ECB raises its interest rates and the Fed stops, the differential between the two regions is reduced and therefore the euro rises.

The productivity of the US economy declined in the first quarter and unit labor costs rose less strongly than initially estimated.

Requests for unemployment benefit rose by 2,000 last week to 232,000, compared to the previous week, maximum for a month.

In addition, the US private sector created 278,000 jobs in May, according to ADP data, which shows the US job market is still strong.

Fed Governor Philip Jefferson, who has been nominated for the vice-presidential position, hinted that the monetary entity it will likely pause interest rate hikes at its mid-June meeting.

“Skipping out an interest rate hike at the next meeting would allow the Committee to see more data before making decisions on the extent of further monetary policy tightening,” Jefferson said.

He fed committee It is divided and several of its members have been in favor of raising interest rates further but others are against it.

The single currency was exchanged in a fluctuation band between $1.0663 and $1.0736.


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