Around 8:15 p.m., the single European currency gained 0.53%, to 1.1094 dollars for one euro.
The euro advanced Thursday against the US dollar, taking advantage of a breather after Wednesday’s rise by the US central bank (Federal Reserve, Fed) in its key rates and despite the lack of diplomatic progress on Ukraine.
Around 7:15 p.m. GMT, the single European currency gained 0.53%, to 1.1094 dollars for one euro. The common currency of 19 European countries even briefly rose above 1.11 dollars, climbing to 1.1137.
The Fed raised its key rates by a quarter of a point on Wednesday, now positioned in a range of 0.25% to 0.50%.
If this development was expected, the monetary policy committee surprised by predicting, by the vast majority of its members, at least seven increases this year.
Seven of the sixteen members of the committee even anticipate at least eight raises in 2022, which would induce a rise of half a point at once during one of the six meetings which remain this year.
This tightening is likely, in theory, to support the dollar, but after an initial inflection, the greenback fell against the euro, a sign of “relief for the markets to see that the meeting (of the Fed) was behind us,” according to Juan Manuel Herrera, currency specialist at Scotiabank.
The dollar thus suffered, according to Joe Manimbo of Western Union, from forex traders who “bought the rumor and sold the news”, according to the classic Wall Street expression (buy the rumor sell the news), which means that we buy an asset before a news that is supposed to raise its price and we sell it immediately after the announcement.
For Juan Manuel Herrera, the optimistic remarks of the president of the Fed on the American economy “pleased the markets, in particular the equity markets, but also other currencies against the dollar, in an atmosphere more favorable to risk”.
The revision of the inflation figure in February by the European Central Bank (ECB), to 5.9%, a record, also benefited the euro, according to Joe Manimbo, because it “clearly leaves on the table the possibility of an ECB rate hike by the end of the year”.
Elsewhere on the foreign exchange market, the pound sterling only marginally benefited from the new rate hike by the Bank of England (BoE), the third in a row, to raise it from 0.50% to 0.75%.
More than the hike, traders noted that this time no member of the BoE’s monetary policy committee voted for a half-point hike, unlike previous meetings, as well as the cautious talk about the trajectory of the British economy, according to Juan Manuel Herrera.