The statement from the ECB, which left the door open to an interest rate hike before the close of 2022 as skyrocketing inflation outweighs worries regarding the fallout from Russia’s invasion of Ukraine, briefly sent the euro higher before market sentiment turned negative.
The ECB follows other major central banks such as the U.S. Federal Reserve and the Bank of England in the post-epidemic tightening cycle, weighing on the single currency.
The euro reached a 22-month low of $1.0804 earlier in the week; investors anticipate the crisis in Ukraine to have a sizeable influence on European growth. The single currency is a meter of Europe’s most significant security crisis after 1945.
Nevertheless, recent speculation that EU leaders were considering joint bond issuance to finance energy and defense spending has supported the euro. EU leaders were assembling on Thursday in Versailles, west of Paris.
At 3 p.m. Eastern time, the euro was falling 0.83% at $1.0985, after having bounced 1.6% on Wednesday; its best day in almost six years.
The Fed should raise rates by at least 25 basis points when it meets next week.
Consumer Prices Surging
The dollar index was higher, 0.547% at 98.506, after dropping 1.17% on Wednesday.
Data on Thursday indicated that U.S. consumer prices rushed 7.9% year-over-year in February; it culminated in the most significant yearly increase in 40 years.
Inflation should accelerate further in the months ahead as Russia’s war against Ukraine drives up crude oil and other commodities expenses.
Commodity-linked currencies, like the Australian dollar, the New Zealand dollar, and the Canadian dollar, were higher on the day; the Aussie rose 0.58%, the Kiwi rose 0.49%, and the loonie rose 0.37%.
Bitcoin tumbled almost 6.02% to $39,434, obliterating most of its gains from the previous day when an executive order from U.S. President Joe Biden requiring the government to prepare reports on the future of the money calmed market fears about an immediate regulatory crackdown on cryptocurrencies.
