FOREX-Euro Braces for ECB Rise, Russian Gas Restart; yen eyes BOJ


Band Kevin Buckland

TOKYO, July 21 (Reuters)The euro held below a two-week high against the dollar as investors prepare tothe European Central Bank’s first interest rate hike since 2011 and the planned reopening of a key Russian gas pipeline later today.

The single currency has also come under pressure from the impending collapse of the Italian government.

Meanwhile, the yen fell slightly ahead of the Bank of Japan’s policy decision on Thursday, the central bank ready to stick with ultra-simple settings.

euro EUR=EBS edged up 0.06% to $1.0188, after falling 0.39% overnight from an intraday peak of $1.0273, the highest since July 6.

The euro had three sessions of strong gains this week on expectations, the ECB could deliver a big 50 rate in basis points rise and a Reuters report that a key Russian gas pipeline would reopen on time after a 10-day maintenance shutdown.

The European Union on Wednesday asked member states to reduce their gas consumption by 15% until March as an emergency measure after President Vladimir Putin warned that Russian supplies sent via the largest pipeline to the Europe could be further reduced and could even stop.

Markets are divided on whether ECB policy makers will deliver a previously telegraphed 25 basis point hike or a half point hike in an attempt to tackle runaway inflation. The monetary authority is also likely to provide more details on a new tool aimed at controlling outsized rises in bond yields on Europe’s periphery.

National Australia Bank sees appointment have mixed implications for the euro.

“Italy’s political uncertainty complicates the ECB’s plans to provide details on its new anti-fragmentation tool, particularly regarding the conditions for triggering the tool”, and a lack of clarity risks dwell on the euro, wrote NAB currency strategist Rodrigo Catril. in a customer note.

At the same time, NAB expects a half-point hike and advice for another half-point increase in September “with the Bank aiming to anticipate rate hikes ahead of weaker conditions later in 2022 and 2023, when room for maneuver may be more limited,” Catril said.

In Japan, the BOJ is expected to continue to thwart the global trend of monetary tightening by keeping stimulus parameters stable, as Governor Haruhiko Kuroda repeatedly telegraphed when approaching to the meeting.

The dollar rose 0.07% to 138.345 yen JPY=EBSmoving back towards the 24-year high at 139.38 seen a week ago.

The British pound continued to consolidate below $1.20 GBP=D3 that the field of candidates vying to be Great Britain next prime minister reduced to two, but one winner it is not expected to be announced until September 5.

The Australian dollar AUD=D3 was little changed at $0.6889, while the New Zealand dollar USD=D3 slipped 0.16% to $0.6220.

World exchange rates

(Reporting by Kevin Buckland; Editing by Sonali Desai)


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