On Friday, the euro fell against its rivals. The single currency fell to its lowest point in more than a year against the Swiss franc, as Italian bond yields resumed their upward march a day after the European Central Bank (ECB) struck a dovish note at a policy meeting.
The European Central Bank’s President Christine Lagarde’s speech affected the market sentiment. She tried to play down the chances of a rate hike in 2022, hinting that market players might be getting ahead of themselves with their predictions.
The ECB made the decision to keep interest rates as well as its monetary policy stance unchanged. Some market participants are not happy with the European Central Bank’s position. They believe the central bank is underestimating current inflationary pressures and will therefore likely have to announce a rate hike before the start of 2023. Still, Christine Lagarde remained resolute at her news conference on Thursday.
Recently, ECB’s Chief Economist Philip Lane expressed his opinion on interest rates. Lane stated that market predictions didn’t reflect what the bank guided for. The ECB previously said it would only start to increase interest rates when inflation remains 2% for the medium term.
The European Central Bank foresees inflation at 2.2% in 2021, 1.7% in 2022, and 1.5% in 2023, thus below its 2% target.
Euro and U.S. dollar
The euro dropped 0.1% versus the dollar at $1.1674. The single currency tanked to its lowest point versus the Swiss franc since July 2020 at 1.0625 francs per euro.
Italy’s benchmark 10-year yield added 9 basis points to 1.08%, compared to 1.05% on Thursday.
Some analysts think some of the interest rate pricing by money markets for 2022 is excessive. Nonetheless, investors believe inflation will remain sticky unless supply-side problems are ironed out and energy prices remain elevated.
The dollar index which tracks the greenback against a basket of currencies, including the euro, advanced 0.1% to 93.462. But the index remained close to Thursday’s low at 93.277.
The Australian dollar dropped 0.1% to $0.7537. In the previous session, the Aussie reached its highest point since early July at $0.75555.
Ether reached $4,400 while the largest cryptocurrency Bitcoin also gained to trade around $61,200. Bitcoin is still far from its all-time high. Last week, the price of Bitcoin rose to $67,016.50, its all-time high.