Euro extends recovery ahead of US payrolls data

Economies.com
2023-03-10 07:54AM UTC

Euro rose in European trade for a second session off two-month lows against dollar after ECB President Christine Lagarde's pledge to fight inflation in the euro zone.

 

The greenback is moving off three-month highs on profit-taking with investors shunning new positions ahead of US payrolls data today.

 

EUR/USD rose 0.2% to 1.0600, with a session-low at 1.0578, after rising 0.35% yesterday, the first profit in three days away from two-month lows at 1.0525, following weak US unemployment claims data.

 

Lagarde

 

ECB President Christine Lagarde vowed to do everything required to bring balance back to prices in the euro zone during a conference held by the World Trade Organization in Geneve.

 

Lagarde vowed to restore prices to normality , as the ECB's main job is to bring back high inflation to normal 2% target throughout the euro zone.

 

She asserted the likelihood of a 0.5% rate hike by the ECB in March ,with other important steps later on to control prices.

 

European Remarks

 

Such sentiment was corroborated by Dutch Central Bank President, who expected multiple more 0.5% rate hikes later on.

 

Estonian Central Bank President Madis Müller said the ECB must hike rates and maintain them at high levels for an extended duration to contain inflation, asserting the March rate hike won't be the last.

 

Similarly, National Bank of Belgium President Pierre Wunsch said the ECB must do more as inflation remains too high with no clear signals of decline so far.

 

He expects European rates to surpass 4% this year, noting that inflation movements are the main determinant of the path forward for the ECB.

 

European Rates

 

Such remarks bolstered the case for multiple more European hikes following the expected 0.5% hike in March by the ECB. 

 

The Dollar

 

The dollar index fell 0.15% today for the second session away from three-month highs at 105.88 against a basket of major rivals. 

 

Dollar was pressured by weak US unemployment claims data, and declining US 10-year treasury yields, which hit three-week lows.

 

During the second part of his Congressional testimony, Fed Chair Jerome Powell reiterated his message on raising interest rates aggressively, maybe even faster than before, but it depends on upcoming data.

 

Following Powell's remarks, odds for a 0.5% rate hike in March rallied from 69% to 78%, while estimates for a 0.25% rate hike tumbled to 22%.

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