The price of the euro rose sharply on Thursday following the European Central Bank’s (ECB) interest rate decision.
In New York trading, the $1.16 mark was exceeded for the first time in more than a week. Most recently, up to 1.1614 US dollars were paid for the common currency, the euro. Before the decision, the ECB had set the reference rate significantly lower at 1.1489 (Wednesday: 1.1500) dollars. The dollar therefore cost 0.8703 euros.
As expected, the ECB left key interest rates unchanged despite all the concerns about the Iran war. However, the central bank expects a surge in inflation in the euro area due to the oil price shock and rising energy costs. She has significantly raised her inflation forecast for the current year: “The war in the Middle East has led to significantly more uncertain prospects,” said the ECB President Christine Lagarde. It threatens to fuel inflation and slow down the economy.
Qatar’s world-critical liquefied natural gas facilities were badly damaged in an Iranian missile attack, driving oil and gas prices higher on Thursday. JPMorgan experts then raised their inflation expectations for the Eurozone. US Bank’s Raphael Brun-Aguerre put his new estimate for May at 3 percent year-on-year and 2.9 percent average for the second half – figures above the ECB’s 2 percent target.
Some experts such as Jens-Oliver Niklasch, economist at Landesbank LBBW, suspect that the ECB will react in an emergency: “If the Strait of Hormuz remains closed, a significant increase in interest rates will be the consequence.” The prospect of rising market interest rates supported the euro. The British pound also went up after the country’s central bank kept its key interest rate stable as expected.
/tih/e.g
NEW YORK (dpa-AFX)
