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Wednesday, March 22, 2023

The super dollar fell after the ECB decision on rates and waiting for the Fed

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The dollar fell and the euro rose on Thursday after the European Central Bank raised interest rates as expected despite the chaos in the markets in recent days, in a sign that the Federal Reserve will do so next week as both continue on the path of controlling inflation.

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The dollar and the euro were held in a narrow range before the The ECB will announce a rate hike of half a percentage point.as promised to curb inflation, and markets priced at more than 80% the probability that the Fed would raise rates by a quarter point on March 22.

“They managed to strike a balance that seems fit for purpose, trying to take some steps in the fight against inflation, while acknowledging that the world has changed since they last met,” said Simona Mocuta, chief economist at State Street Global Advisors in Boston.

The ECB raised rates at the fastest pace in history and the Fed at its fastest pace in four decades to curb high inflation.

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But the collapse of global markets following the failure of Silicon Valley Bank in the United States last week and the plunge in the value of Credit Suisse shares this week threaten to upend those plans.

The euro fell 0.3% after the ECB decision, but later reversed its trend. The euro rose 0.4% to $1.0615, while the dollar index fell 0.258%.

Currency markets and other markets calmed on Thursday after Credit Suisse said it would borrow up to $54 billion from the Swiss National Bank to shore up liquidity and investor confidence. The bank’s shares had plunged as much as 30% on Wednesday.

That stability also helped the Swiss franc strengthen, with the dollar falling more than 1% against the currency at 0.9232, reversing part of its 2.15% gain on Wednesday, the biggest daily gain since 2015. .

The Japanese yen appreciated 0.04% to 133.47 units per dollar, while the pound traded at 1.212 dollars, an increase of 0.5%.

Source: Ambito

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