Lagarde’s comments implied an increase of at least 50 basis points in the ECB’s deposit rate. In addition, these statements made the operators speculate that there will be higher increases this summer to fight against the increase in inflation.
“They were a little late to the party, compared to the Fed”John Doyle, vice president of trading and trading at Monex USA, said of the ECB, noting, “But if they’re going to try to catch up with our tightening cycle here, then that spread that the dollar enjoyed between the Fed and the ECB tightened a bit and so you saw the euro ease a bit from those multi-year lows.”
The minutes of the Fed’s monetary policy meeting on May 3-4 will be released on Wednesday. Against a basket of other major currencies, the dollar fell 0.372% to 101.76 units, its lowest level since April 26.
“The greenback weakened further after data showed US business activity slowed in May as rising prices cooled demand for services, while new supply constraints due to Covid lockdowns -19 in China and the war in Ukraine hampered production in factories,” said operators.
For its part, Sterling fell against the dollar after PMI data showed British private sector momentum slowed much more than anticipated this month, which increased recession concerns as inflationary pressures mounted. The British pound fell 0.48% to settle at $1.2525.
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