The euro rose on Monday as hopes for an increase in eurozone printing rose on Wednesday after Spain’s inflation figures came in unexpectedly high. At the same time, the dollar remained close to an eight-month low ahead of several central bank meetings this week.
After data showed that Spain’s consumer prices increased 5.8% in January compared to the same month a year prior, a faster increase than the 5.74% on-year increase recorded in December and the first increase since last July, the euro increased 0.24% to $1.0881.
The U.S. dollar index, which contrasts the dollar with a basket of its competitors, including the euro, was little changed at 101.88 after falling to an eight-month low of 101.50 last week.
Expectations that the Fed’s rate-hike cycle is about to end and that interest rates won’t need to rise as high as previously feared put pressure on it. It experienced a more than 1.6% decline in January and is going for a fourth straight monthly loss.
The Spanish CPI data caused the euro to move higher, but there is also a risk-off mood that should be slightly supportive of the dollar. The Fed should raise rates by 25 basis points, down from the 50 and 75 basis points it did last year, while the BoE and ECB are anticipated to do so by 50 basis points each.
Euro Finds Support
The euro has found support from the ECB policymakers’ continued hawkish rhetoric and waning concerns about a severe recession in the eurozone, which will likely lead to a gain of close to 1.75% for the month. After Bank of Japan governor Haruhiko Kuroda stated on Monday that the central bank must maintain its easy policy, the yen dropped 0.3% to 130.195 per dollar in other markets.
After Australia’s inflation rate rocketed to a 33-year high last quarter, traders increased their bets that the Reserve Bank of Australia will have to raise interest rates further. As a result, the Australian dollar fell 0.5% to $0.7071 but was still on track for a monthly gain of almost 4%.
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