NEW YORK (dpa-AFX) – The euro exchange rate came under heavy pressure on Thursday following monetary policy decisions by the European Central Bank (ECB). Hours earlier, after the common currency had reached the $1.10 mark for the first time since April 2022, the price fell by more than a cent over the course of the year. It only stabilized below the $1.09 mark, as $1.0912 was last paid. The ECB had set the reference rate at $1.0988 (Wednesday: $1.0894) during the day.
In the afternoon, as was generally expected, the ECB raised the key interest rate by 0.50 percentage points to 3.0 percent in order to curb high inflation. In addition, the monetary watchdogs made it clear that another rate hike of 0.50 percentage points will take place in March. Despite the prospect of further increases in interest rates, the euro came under pressure.
Christian Lips, chief economist at NordLB, referred to statements by the ECB President Christine Lagarde. After the interest rate decision, the bank said that all future decisions would depend on the data. Lagarde reiterated that while inflation remains “much too high,” the risks to future inflation developments are now more balanced. According to analyst Michael Hewson from the trading house CMC Markets, the statements indicate that the time for interest rate hikes is coming to an end.
Market observers also drew parallels to the market reaction after the US Federal Reserve’s interest rate decision on Wednesday evening. Here the currency guardians had after the rate hike also signaled a further increase in interest rates by 0.25 percentage points. Nevertheless, the US dollar had fallen sharply on Wednesday evening. According to analysts, the US monetary authorities have not managed to completely convince the markets that the key interest rate will continue to rise reliably./jkr/jsl/mis/tih