Euro advances above $1.1 for first time in 10 months ahead of ECB decisions

Euro rose in European trade for the third straight session against dollar, moving above $1.1 for the first time in ten months as concerns about a policy gap between the US and Europe fade. 

Dollar extended its losses after the Fed wrapped up its meeting and hiked rates by 25 basis points, with Jerome Powell noting the reduction of US inflation in recent months.

EUR/USD rose 0.4% to 1.1033, the highest since April 2022, with a session-low at 1.0984, after rising 1.2% yesterday, the second profit in a row, and the largest such profit since early December.

ECB

Now investors await the European Central Banks's meeting decisions today, after data showed European inflation slowed down in January.

The ECB is preparing for a 0.5% rate hike for the second meeting in a row to 3%, the highest such level in Europe since 2008. 

ECB President Christine Lagarde said recently that inflation remains too high and the bank is committed to continuously increase interest rates until inflation is brought back to 2%.

Lagarde once again repeated the use of the phrase "staying the course" when talking about interest rate decisions at upcoming meetings, meaning the current pace will be maintained at least until the second quarter of the year.

Other ECB members strongly hinted at multiple 0.5% rate hikes in both February and March.

The Dollar

The dollar index fell 0.35% today, plumbing ten-month lows at 100.82 against a basket of major rivals. 

The Fed recently increased interest rates by 25 basis points to 4.75%, the highest since September 2007. 

Fed Chair Jerome Powell touted the slowdown in consumer prices in recent months, and said the Fed will continue to take decisions every meeting based on the most recent data. 

Will euro mark more gains against dollar above $1.1?

Yes it's expected for euro to increase its lead above $1.1 if the ECB opened the way strongly for multiple more 0.5% rate hikes in upcoming meetings, closing the gap between Europe and the US.