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Title : Euro holds above 2-decade low before ECB decision

Sep 8, 2022 11:29 AM ET


The euro hovered above Tuesday's two-decade lows on Thursday as investors awaited the European Central Bank's policy decision and comments from the Federal Reserve chief on the path of global monetary tightening.

The ECB is expected to raise interest rates by 75 basis points, taking its deposit rate above zero for the first time since 2012, but the option of a smaller 50 basis point hike has not been ruled out.

"We expect the ECB to only do 50 basis points today, rather than the consensus view of 75," said Chris Turner, head of markets at ING. "If that's the case, we think the euro-dollar will probably correct back to around $0.99."

By 0747 GMT, the euro was trading down 0.3% at $0.99795, holding above its lowest level since late 2002 of $0.9864, as Europe's energy crisis keeps the single currency under pressure and the dollar reignites as the Fed reiterates its commitment to bring inflation down to target.

Fed Chairman Jerome Powell is scheduled to take part in a discussion at 1310 GMT—which will overlap with ECB chief Lagarde's post-decision press conference—and Fed officials are soon to enter a period of suspended activity ahead of the central bank's Sept. 20-21 meeting.

Recent Fed rhetoric has remained hawkish in general.

Boston Fed President Susan Collins said Wednesday that getting inflation back to 2% is the Fed's "first job," while Vice Chair Lael Brainard said tight monetary policy will continue "for as long as it takes to bring inflation down."

Money markets are offering a 79% chance that the Fed will raise another 75 basis points at this month's meeting, which would raise the federal funds rate to 3.0% or 3.25%.

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