Thursday, November 30, 2023

Euro rises and trades above $1.10 ahead of Fed decisions

The euro appreciated to $1,1050 despite the good data from the US economy and before the Federal Reserve (Fed) publishes its decision on interest rates.

He euro was changed around 03:00 GMT to $1,1052compared to US$1.0991 in the last hours of the European currency market trading of the previous day.

He European Central Bank (ECB) set the reference exchange rate for the euro at US$1.1043.

The private sector created USA in April 296,000 jobs, a nine-month high that shows the job market is strong, according to ADP data.

In addition, the activity of the sector services improved in the US in April.

The Head of Fixed Income at Ibercaja Gestión, Cristina Gavin, comments that the Federal Reserve considers inflation levels still high and this is the fundamental argument to justify an additional rise of 25 basis points in the reference rate, which is now between 4.75 and 5%.

The solidity which still shows US economic activity and a working market still stressed, are additional arguments for the Fed to further tighten its monetary policy.

From there, Gavin expects a pause in the process of increases, and does not rule out, if the uncertainties about the financial sector intensify, cuts in interest rates before the end of the year in the US.

Regarding the ECB, Gavín points out that “although the market gives as motion a 25 basis point rise is more likely, the odds of a rise of 50 basis points have been gaining traction over the last few days” after statements by the most aggressive members of the Government council.

It also foresees that the rise in price of money in the euro area this week will not be the last and that the deposit facility, now at 3%, will reach 3.75%, which would mean, in addition to the rise of 25 basis points this Thursday, two uploads also additional 25 basis points at the June and July meetings.

The currency The single currency was exchanged in a fluctuation band between US$1.1005 and US$1.1052.


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