Euro Declines As Lagarde Warns Against Rapid Rate Hike

February 13, 2022
Euro Declines As Lagarde Warns Against Rapid Rate Hike February 13, 2022 Lennox Hamilton

The euro fell versus its main equivalents during the European session Friday, in response to remarks from the ECB (European Central Bank) President Christine Lagarde, who said that a hasty rate rise would be detrimental to the economy and that, as a result, any increase will be phased in gradually.

She stated in a talk with Redaktionsnetzwerk Deutschland that increasing benchmark rates will not alleviate any of the existing issues. “If we move too quickly today, the rebound of our economy might be far slower, and employment could be jeopardized,” said the president of the United States.

Lagarde stated that, despite the fact that inflationary pressure is expected to continue rather high in the forthcoming months, it will begin to decline by the end of 2022. The head of the European Central Bank said that inflationary pressure is anticipated to be greater than forecast in December. In March, the Governing Council will review the situation and make a decision based on its findings.

Lagarde went on to say that the central bank is inching towards its inflation target, which would allow it to progressively reduce the number of steps it is taking. According to statistics from Destatis, wholesale prices in Germany started to climb at a rapid pace in the first month of the year. The surge in wholesale prices in January was 16.2% on y-o-y basis, after a 16.1% jump in December. Prices surged 16.60% in November.

A drop in the Eurodollar’s value versus the dollar and the pound has caused it to fall to 8-day nadir of 1.1370 and 0.8392, respectively, from its previous peak of 1.1430 and 0.8429. The Eurodollar is expected to test support at 1.12 versus the dollar and 0.82 versus the pound. The euro fell from its initial peaks of 132.61 versus the yen and 1.4540 versus the loonie to 131.89 and 1.4483 versus the yen and 1.4483 against the loonie, respectively.

According to market forecasts, the euro will receive support from buyers at about 128.00 yen and 1.42 Canadian dollar versus the yen. The euro slipped to 1.7101 versus the kiwi and 1.5943 versus the aussie, easing off its two-day peak of 1.7167 and a three-day top of 1.6004 in the Asian trading session, respectively, and down from its three-day top of 1.6004.

On the lower side, it is likely to find support around 1.66 and 1.56 versus the kiwi and the aussie, respectively, as it continues to fall further. The euro, on the other hand, has been fluctuating versus the franc since climbing to 1.0574 at 3:50 a.m. ET. At the end of yesterday’s trading session, the pair was trading at 1.0561.

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