NEW YORK (dpa-AFX) – On Thursday, the euro reacted to the prospect of rapid interest rate hikes in the USA with significant losses. 1.1140 US dollars were last paid for the common currency in New York trading. Previously, $1.1132 marked the lowest level since mid-2020. The European Central Bank set the reference rate at 1.1160 (Wednesday: 1.1277) dollars. The dollar thus cost 0.8961 (0.8868) euros.
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The US dollar has been on the up against many other major currencies since the Federal Reserve’s interest rate decision on Wednesday. The Fed left its key interest rate stable at the zero line for the time being. However, it gave clear signals for an imminent increase. According to Fed Chair Jerome Powell, it could happen as early as the next meeting in March. The background is the high inflation of seven percent recently.
Powell’s statements, which the markets interpreted as an indication of a rapid tightening of interest rates, attracted particular attention. He said that the initial situation today is different from the last, rather cautious interest rate hike by the Fed from 2015. Powell left open the question of whether the central bank could raise its key interest rate at each of the seven interest rate meetings scheduled for this year. However, he also said that the pace of the tightening is not predetermined and depends on economic developments.
On the market, investors adjusted their interest rate expectations to the Fed on Thursday. Five interest rate hikes are now even expected this year, as can be seen from special financial contracts. There were four hikes before the Fed rate meeting.
Ulrich Kater, chief economist at Dekabank, commented: “The Fed is taking it seriously. There will be more interest rate hikes and liquidity withdrawals this year than market participants had hoped for.” In the long term, this is a good sign, because it will contain the risk of inflation. In the short term, however, the markets would first have to digest a tighter monetary policy.
Economic data from the USA meanwhile did not provide a uniform picture and no longer moved the euro much over the course of the year. The US economy grew faster than expected in the fall, and orders for durable goods fell more sharply than expected in December. “On balance, the Fed will probably not be deterred by the numbers and will implement the recently announced imminent entry into interest rate hikes and balance sheet reduction,” summarized analyst Ralf Schweden from Landesbank Helaba./la/jsl/tih/he