The euro gained a little on Thursday following the European Central Bank’s (ECB) interest rate decision against the US dollar.
The common currency cost 1.1708 dollars in the afternoon. In the morning it was still under pressure and had fallen to its lowest level since the beginning of April. The European Central Bank set the reference rate at 1.1702 (Wednesday: 1.1706) US dollars. The dollar therefore cost 0.8545 (0.8542) euros.
The ECB has left key interest rates in the euro area unchanged despite the surge in inflation as a result of the Iran war. However, economists expect the central bank to raise interest rates later this year – possibly as early as June. “The longer the war lasts and the longer energy prices remain at high levels, the greater this is likely to have an impact on general inflation and the economy,” said the ECB President Christine Lagarde in Frankfurt. The possibility of one was already at the current meeting of the ECB Governing Council Interest rate increase “discussed in detail”.
“An interest rate hike in June has become more likely,” commented Thomas Gitzel, chief economist at VP Bank. “The ECB will make its next interest rate decision dependent on current developments in the Persian Gulf.” However, given the economic risks and the resulting price-dampening effects, Gitzel does not expect a cycle of interest rate increases. Economic growth already increased in the first quarter Eurozone weakened. The inflation rate, however, rose to 3.0 percent in April. The ECB is aiming for just 2.0 percent in the medium term.
In recent days, the euro has been weighed down by developments in the Middle East war. In view of the naval blockade imposed by the United States against Iran, the commander of the Iranian Navy has threatened US troops in the region. There is currently no sign of an opening of the Strait of Hormuz, which is important for global goods traffic. Against this background, the price of oil remains at a high level, which is fueling concerns about inflation and growth.
Meanwhile, the Japanese yen has gained significantly against the euro and dollar. Speculation that the Japanese government had intervened in the foreign exchange market boosted the yen.
For other important currencies, the ECB set the reference rates for one euro at 0.86625 (0.86643) British pounds, 183.21 (187.05) Japanese yen and 0.9190 (0.9236) Swiss francs. A troy ounce of gold (around 31.1 grams) most recently cost $4,620. That was around $77 more than the day before.
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FRANKFURT (dpa-AFX)
