Wait-and-see ECB boosts euro comeback as King Dollar's crown slips
ECB holds rate steady after June rate cut
Euro sticks near four-month highs vs dollar
Investors say French fiscal showdown remains a risk
By Naomi Rovnick and Dhara Ranasinghe
LONDON, July 18 (Reuters) -Traders on Thursday kept the euro on course for a strong comeback as prospects for the European Central Bank turning cautious after an expected second rate cut in September swept anxiety about French politics out of the currency's path.
With global markets lined up for quick-fire U.S. rate cuts, the ECB signalled heightened concerns about volatile inflation, helping to sustain an upward shift for the euro that is near four-month highs after being shaken by French government turmoil in June.
The ECB left its deposit rate unchanged at 3.75% after lowering it from 4% in June for the first time in five years and president Christine Lagarde stressed it was not committed to a particular rate path.
By contrast, Federal Reserve chief Jerome Powell on Monday said he felt more confident U.S. inflation truly had moderated.
That has helped, at least temporarily, to bolster the euro, boosting the currency more than 2% against the dollar so far this month after a roughly 1% drop in June.
The euro was trading at around $1.093 on Thursday, down a touch on the day but still heading for its biggest monthly jump since November.
"Extreme scenarios around French political risk are abating and markets are convinced the Fed will be cutting rates soon and we've started to see softness for the dollar against most currencies," said Lombard Odier macro strategist Bill Papadakis.
But the euro has slipped against the Swiss franc and sterling this month. And investors warned that the euro was not a straight bet should Donald Trump win U.S. presidential elections in November. Trump has proposed import tariffs that could hurt the euro zone economy, revive U.S. inflation and send U.S. rates and the dollar higher.
"We expect the euro zone-to U.S. interest rate differential to shrink which should lead to some dollar depreciation," said Amelie Derambure, a multi-asset portfolio manager at Amundi.
"But markets see a Trump victory as a dollar-bullish event and so until the election the depreciation will be limited."
CURRENCY COMEBACK ASSURED?
Money markets are pricing in more than two rate cuts from the Fed by year-end and just under two for the ECB.
The dollar has stood tall over most of its rivals for most of the past year, but is seeing its crown slip as interest rate support fades. The index that measures the dollar against major peers =USD is 2% lower in July so far.
The euro, meanwhile, has recovered from a fall in June, when it hit two-month lows against the dollar, as French President Emmanuel Macron's snap parliamentary election created political instability at the heart of the euro zone and pulled France's deep budget deficit into focus.
Prospects of euro zone members wrangling over a French fiscal emergency in June revived memories of past euro sovereign debt crises pulling the common currency project close to the brink of collapse.
That fear is fading, with the extra income yield traders demand to hold French 10-year bonds over their German equivalents now about 65 bps, after surging briefly in June to a 14-year high of 85 bps.
"Our view is that (the ECB) will cut in September and again in the fourth quarter, but they are in a slow rate cutting cycle," said David Zahn, head of European fixed income at Franklin Templeton.
SLOWDOWN RISKS
Lagarde on Thursday hinted she was concerned about euro zone growth in the context of potential global trade wars.
Trump's pledge to hike import tariffs was a serious risk for the currency bloc's export-focused economy, Edmond de Rothschild Asset Management CIO Benjamin Melman said.
"China is at the forefront because this has more political impact but Europe can also be an easy target," he said.
Melman, who expects the ECB deposit rate to be no higher than 2.5% by end-2025, is positive on short-term government bonds, which benefit from rate cut expectations.
Konstantin Veit, a portfolio manager at bond fund PIMC, said he did not see big moves in the euro against the dollar from here.
"They (ECB policymakers) are not in a mad rush."
Euro lags its European rivals https://reut.rs/4d1g91H
Euro zone inflation and ECB interest rates https://reut.rs/4d2ZvOA
ECB holds interest rates https://reut.rs/3zFNSyD
Reporting by Naomi Rovnick and Dhara Ranasinghe; Additional reporting by Amanda Cooper, Editing by Jane Merriman
İlgili varlıklar
En son haberler
Bildirim: XM Group şirketlerinin her biri yalnızca gerçekleştirme hizmeti ve online yatırım platformumuza erişim sağlar. Herhangi bir kişinin web sitesinde bulunan veya web sitesi üzerinden sağlanan içeriği görüntülemesine ve/veya kullanmasına izin vermek, bu hizmeti değiştirmek veya genişletmek amaçlı değildir ve bu hizmeti ne değiştirir ne de genişletir. Bu tür erişim ve kullanım her zaman şunlara tabidir: (i) Şartlar ve Koşullar; (ii) Risk Uyarıları ve (iii) Tam Bildirim. Bu nedenle bu tür içerikler yalnızca genel bilgi amacıyla sağlanır. Özellikle, online yatırım platformumuzun içeriklerinin finans piyasalarında herhangi bir işleme girmek için bir teşvik veya bir teklif olmadığını lütfen dikkate alın. Herhangi bir finans piyasasında yatırım yapmak sermayeniz için önemli düzeyde risk taşır.
Online yatırım platformumuzda yayınlanan tüm materyaller yalnızca eğitim/bilgilendirme amaçlıdır ve finansal tavsiye, yatırım vergisi veya yatırım tavsiyesi ve önerileri ya da yatırım fiyatlarımızın kaydı veya herhangi bir finansal enstrümanda işlem yapılması için bir teklif veya teşvik ya da talep edilmemiş finansal promosyonları içermez ve içerdiği şeklinde bir değerlendirme yapılmamalıdır.
Görüşler, haberler, araştırma, analizler, fiyatlar, diğer bilgiler veya bu web sitesinde bulunan üçüncü taraf sitelere verilen bağlantılar gibi her türlü üçüncü taraf içeriğin yanı sıra XM tarafından hazırlanan içerik de “olduğu gibi” esasına göre, genel piyasa yorumu olarak sağlanır ve bir yatırım tavsiyesi oluşturmaz. Herhangi bir içeriğin yatırım araştırması olarak yorumlanmasıyla ilgili olarak, içeriğin bağımsız yatırım araştırmasını desteklemek üzere tasarlanmış yasal gerekliliklere uygun hazırlanmadığını ve bu amacın güdülmediğini, aynı şekilde ilgili yasalar ve mevzuatlar kapsamında pazarlama iletişimi olarak değerlendirileceğini dikkate almalı ve kabul etmelisiniz. Buradan erişebileceğiniz Bağımsız Olmayan Yatırım Araştırması Bildirimimizi ve yukarıdaki bilgilerle ilgili Risk Uyarımızı okuduğunuzdan ve anladığınızdan emin olun.
