Weekly Roundup: Euro knocked by ECB policy uncertainty

Amy Richards January 23rd 2023 - < 1 minute read

The euro opened last week on solid footing. The single currency initially attracted support on the back of Germany’s latest ZEW survey, after economic sentiment in the Eurozone’s largest economy turned positive for the first time since February 2022.

However, EUR exchange rates then plummeted in response to a Bloomberg report in which it was claimed the European Central Bank is planning to slow the pace of its monetary tightening following its February meeting.

The Euro’s then recouped some of these losses later in the week as ECB policymakers, including president Christine Lagarde, sought to push back against these rumours

Lagarde suggested the ECB will need to ‘stay the course’ with its current pace of interest rate hikes, boosting hopes the bank will continue to deliver 50bps increases in the coming months.

The euro’s recovery was also supported in the latter half of the week by its negative correlation with the US Dollar.

The publication of the Eurozone’s latest PMI figures will be in the spotlight for EUR investors this week. Will a modest expansion in the bloc’s service sector help to dispel recession fears and lift the euro?

Written by
Amy Richards

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