Tue, February 07, 2023

Euro Plunged Below $1.16 Ahead of ECB’s Meeting 

dollar, Weekly Market Overview: Forex, Stocks, Crypto, Commodities

The euro fell below $1.16 ahead of the European Central Bank’s (ECB) meeting on Thursday. Investors are closely monitoring the central bank’s meeting. They would like to learn more about policymakers’ views on the outlook among other topics.

The single currency dropped 0.2% to $1.1586 by 09:50 GMT.

The dollar index which tracks the greenback against a basket of currencies stood at 93.94.

The Australian dollar dropped on growing speculation about the country’s central bank’s tightening plans, while the yen was unruffled after the Bank of Japan stuck with its dovish stance.

The Japanese yen rose to 113.71 per dollar but remained close to four-year lows. The Bank of Japan reduced its consumer inflation target for the year ensign in 2022 to 0% from 0.6%. As expected the BOJ will lag other central banks in dialing back crisis-mode policies. 

The Bank of Japan said the economy will likely grow 3.4%, rather than the 3.8% projected in its previous meeting in July. 

It will continue to buy exchange-traded funds with an upper purchase limit set at 12 trillion yen ($106 billion) a year. The BOJ’s policy board also decided to keep funding support for struggling firms amid the pandemic. 

 

Euro, Australian dollar and important factors 

Analysts expect the European Central Bank to push back against growing expectations regarding a rate hike in 2022. Euro zone inflation expectations also continue to increase. One market gauge reached its highest point in seven years. 

The Australian dollar fell 0.1% to $0.7572, near its three-month top as Australian bond yields jumped to their highest since mid-2019. The Reserve Bank of Australia decided not to buy a government bond at the heart of the stimulus program. Its decision influenced Australian bond yields. 

The yield target is very important to the RBA’s case that the 0.1% cash rate will not rise until 2024. Hence, any failure to maintain it fuels market wagers that rates will have to rise much earlier, perhaps even by mid-2022.

The Australian dollar initially dropped 0.5% after the RBA statement but soon erased those losses.

Investors and analysts are also waiting for the GDP data from the U.S, with expectations it will show weakening momentum in the U.S. economy. 

Bitcoin gained 4% to $60,845. The world’s most-recognizable cryptocurrency rose to $67,016 on October 20.

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