Euro finds footing thanks to hawkish policy comments and cheaper energy costs

9 Nov 2023 , 09:47 AM

On Thursday, the euro was stable vs the dollar and close to a 15-year high versus the yen due to hawkish comments made by European officials and the expectation of declining energy prices.

The currency held up against the growing US dollar at $1.0703 with the chief economist of the European Central Bank expressing his disappointment with the pace of inflation control.

Since the Bank of Japan put short-term rates on hold last week, the euro has surged to its highest level since 2008 at 161.73 yen. Investors view this combination as safer than taking on the risk of a dollar/yen intervention.

This week, the euro has gained 0.5% as well, to 87.14 pence.

The markets do not anticipate any further interest rate increases, as stated by Ireland’s central bank boss Gabriel Makhlouf on Wednesday. Meanwhile, Bundesbank President Joachim Nagel stated that the ‘late mile’ to the inflation target might be the most difficult.

A decline in U.S. Treasury yields did not do much to strengthen the yen; overnight, the 10-year rate closed at its lowest level since mid-September, but the yen fell back to 151 per dollar.

While declining oil prices were a welcome respite for many in Europe, they had a negative impact on currencies related to commodities, like the New Zealand and Australian dollars as well as the Canadian dollar.

With a 0.5% overnight decline, the Australian dollar recently traded at $0.6405, which is just above its 50-day moving average.

After raising rates on Tuesday, the central bank seemed to set the bar for more hikes, and it appears headed for its biggest weekly decline since June. At $0.5910, the New Zealand dollar also recovered somewhat from its overnight decline. The Norwegian krone is about where it was at the beginning of the year.

Mario Draghi, a former Italian prime minister and chairman of the European Central Bank, said that Europe would almost surely enter a recession, with rising energy prices being one of the main causes.

Nevertheless, in only two weeks, Brent crude prices have dropped 12%. With a pleasant start to autumn delaying the onset of heating demand and high prices discouraging industrial use and encouraging continued imports, Europe’s record gas inventories are also continuing to rise.

China’s yuan plunged to a two-month low in offshore trade overnight in Asia. According to Reuters, Ping An Insurance Group has been ordered by Chinese regulators to acquire a controlling interest in Country Garden, a struggling property developer.

According to data released on Thursday, China’s consumer prices decreased in October, raising hopes for a reduction in interest rates.

Jerome Powell, the chairman of the Federal Reserve, will give a speech later in the session.

Although Israeli soldiers engaged Hamas militants in close quarters in Gaza City, the Bank of Israel’s aggressive dollar selling contributed to the shekel’s return to pre-war values of 3.83 to the dollar.

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