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Euro rises ahead of ECB meeting

written by Bella Palmer
euro-rises

The euro rose 0.5% on the day to $1.0946 on reports that the European Union was discussing joint bond issuance

The euro and other European currencies edged up on Wednesday ahead of this week’s central bank meeting and supported by reports that the European Union was discussing joint bond issuance to finance energy and defence spending.

After touching a 22-month low on Monday sliding to as much as $1.0806, the euro rose 0.5% on the day to $1.0946 helped by a report citing unnamed officials that said the European Union was discussing joint bond issuance.

Sterling rose 0.3% against the dollar to $1.3134.

European currencies have been under heavy pressures for the past couple of weeks and some of these valuations have begun to look stretched, said Jane Foley, head of FX Strategy at Rabobank in London.

Yesterday’s news that the EU is considering issuing debt to finance energy and defence spending underpinned the euro and helped trigger the better tone in euro and European currencies, she added.

But analysts also said the euro is unlikely to rise much while there is so much worry about the war in Ukraine spreading.

Other European currencies such as Poland’s zloty and Hungary’s forint rebounded from record lows against the euro, both supported also by their central banks’ sharp interest rate hikes on Tuesday.

The European Central Bank meets on Thursday but amid the spectre of stagflation, money markets expected policymakers to delay rate hikes until late in the year.

The U.S. dollar against a basket of currencies including the euro was 0.35% lower at 98.764, just below a 22-month peak touched on Monday.

Analysts said expectations for a Federal Reserve rate hike and safe haven demand suggested the U.S. dollar will unlikely give up too much ground.

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