Knot said the European Central Bank was not only going to raise the interest rate by 25 basis points in July, but was also willing to consider a bigger hike if inflation turned out to be higher than expected.
Following these comments, the euro soon doubled its gains to 0.8%, standing at $1.0527.
The currency had already benefited from Monday’s remarks by François Villeroy de Galhau, the ECB’s monetary policy maker, that a weak euro could threaten price stability in the currency bloc.
Fears that escalating tensions with Russia will trigger a gas embargo, a euro zone recession and prevent the ECB from raising interest rates have weighed on the common currency’s outlook.
The British pound also took advantage of the dollar’s weakness to return to its highest level since May 5, after strong labor market data reinforced expectations that the Bank of England will continue to raise rates to fight inflation. .
The Chinese yuan gained 0.68% after a sharp drop that has caused it to lose nearly 7% since mid-April.
Despite all the short-term pressure, greenback strength is expected to remain a driving force in 2022 as the US Federal Reserve implements a new monetary tightening cycle.
The market will closely watch interventions from Fed policymakers on Tuesday, including Chairman Jerome Powell at 1800 GMT, for any clues as to whether near-term rate expectations could be even more aggressive.
The respite from the greenback sent the dollar index down 0.62% to 103.52, about 1.5% below last week’s two-decade high of 105.010.
By Julien Ponthus, Reuters Agency
Source: Ambito
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