FRANKFURT (dpa-AFX) – The euro rose on Wednesday before the interest rate decision by the US Federal Reserve. In the late afternoon, the common currency cost 1.0910 US dollars, a good half a cent more than the daily low. The European Central Bank set the reference rate at 1.0894 (Tuesday: 1.0833) dollars. The dollar thus cost 0.9179 (0.9231) euros.
Before the US interest rate decision in the evening, the euro benefited primarily from a slightly weaker dollar. The US currency came under pressure after disappointing numbers from the US job market. The employment development reported by the service provider ADP was significantly weaker than expected in January.
A weaker labor market is not inconvenient for the US Federal Reserve. The currency guardians want to decide on their monetary policy course in the evening. They consider the job market to be overheated given the very low unemployment and sharply rising wages. The central bank sees this as an additional source of inflation that can also drive high inflation.
Since the high inflation rates have recently tended to fall, the Fed is expected to adopt a somewhat more moderate course. It is likely to slow down its pace of rate hikes again. Analysts expect key interest rates to rise by 0.25 percentage points. Last year, the Fed made rate hikes of up to 0.75 points to keep inflation in check.
The question of whether the Fed will continue to tighten in the coming months promises to be particularly exciting. Lower inflation and the weaker economy tend to speak against it. Interest rate cuts are even expected on the financial markets in the second half of the year.
For other important currencies, the ECB set the reference rates for one euro at 0.88413 (0.88073) British pounds, 141.37 (141.27) Japanese yen and 0.9980 (1.0032) Swiss francs. A troy ounce of gold was trading at $1,928 in London this afternoon, about the same as the previous day./bgf/jsl/jha/