Euro Gains Value on US Dollar Ahead of the ECB

The financial market recently witnessed the euro gaining value on the US dollar. A major reason behind the movement came after the ECB (European Central Bank) meeting about the euro’s GDP figures.

The meeting concluded with the final annualized GDP of 4.1% against the 3.9% accrued in July. Many traders and investors looked for expert analysis, primarily after reading several IG reviews.

According to experts, the ECB expects to raise rates by 75 points. The OIS (overnight index swaps) market is not equally convinced, pricing around 67 bps. On the other hand, central banks worldwide are tightening their rates amid rising inflation.

The BoC (Bank of Canada) and the RBA (Reserve Bank of Australia) have already raised rates this week. Similarly, the Fed also made its take clear about addressing price pressures. Loretta Mester, the Cleveland President of the Fed, also reiterated the institution’s hawkish stance.

As per Mester, the Fed rates are likely to be significantly higher with no perceivable cut in 2023. Thus, the Treasury yields through the curve to levels unattained in the past several years. The market has seen the two-year note trading at 3.55%, a yield unseen since the financial crisis in 2007.

A rise in Treasury yields has underpinned the dollar, keeping the EUR/USD under pressure. The energy supply has also taken a hard hit after Russia’s invasion of Ukraine. The benchmark TTF (title transfer facility) natural gas futures contract dropped in August.

On the other hand, EUR/JPY is also touching its seven-year high amid Japan experiencing economic failures. That is why the latest move by the ECB is expected to help the euro elevate its position against the dollar.