Forex
The euro touched a two-week maximum against the US dollar during early Wednesday trading, having recovered more than 2 percent since hitting parity with the greenback at the end of last week. There are two main reasons for this recovery: Expectations over a 100 basis points rate hike by the Fed have faded, following remarks by two of the most hawkish members of the Federal Reserve Monetary Committee, who confirmed it is still working under the assumption that the central bank will stick to the scripted 75 basis points increase. The cooling down of market expectations over the pace of the Fed’s hiking cycle translated into less demand for the dollar. Also supporting the euro are shifting expectations on the other side of the Atlantic, with foreign exchange traders alert to reports that mention the possibility of a larger than previously expected rate hike when the ECB meets on Thursday. According to some observers, the increase could be of 50 basis points, instead of the 25 bp previously signalled by the European Central Bank.
Ricardo Evangelista – Senior Analyst, ActivTrades
