EUR/USD retreated modestly from multi-week highs on Friday but ended up gaining

Started by OZER, Feb 07, 2022, 06:04 PM

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 Euro falls back after surging last week

* Analysts say ECB turn is big deal for single currency

* Dollar ticks higher, traders await Thursday CPI data
(Adds details, more quotes, latest prices)

LONDON, Feb 7 (Reuters) - The euro dipped on Monday after a
surge last week that followed a hawkish shift by the European
Central Bank, as traders turned to the dollar betting the jump
in U.S. jobs created in January could lead to faster Federal
Reserve rate hikes.

The European common currency dropped 0.2% to as
low as $1.1415, having hit its highest since mid-January on

Those gains had been driven by a hawkish turn from the ECB,
which led markets to bring forward the likely timing of euro
zone rate rises and sent bond yields sharply higher.

"President Lagarde's clear signal that the door
has opened for rate hikes later this year is a real game changer
for the foreign exchange market," said MUFG analyst Lee Hardman.

"Over the past year the EUR has underperformed on the back
of expectations that the ECB will maintain loose policy while
the BoE and Fed tightens," Hardman said, predicting that market
participants would now pare back short euro funding positions.

ECB policymaker Martins Kazaks, in an interview with
Reuters, pushed back against market expectations for a rate hike
as soon as July. He said the ECB could end its stimulus
programme earlier than planned but it was unlikely to raise its
main interest rate in July.

Not everyone is convinced by the market's reading of the
ECB's hawkish tilt.

"We don't believe the ECB is bracing for a sudden
acceleration of tightening. We still see the Fed as being on
track to move well ahead of the ECB, providing support for the
dollar," said Mark Haefele, Chief Investment Officer at UBS
Global Wealth Management.

He said he expected the euro to fall to $1.10 by year-end
and the dollar gaining versus the Swiss franc to finish the year
at 0.98 francs per dollar, from 0.92 currently.

The dollar found some support on Monday, helped by U.S.
Treasury yields that rose after far better-than-expected jobs
data on Friday.

Markets have now priced in a one-in-three chance the
Fed might hike by a full 50 basis points in March, and a
reasonable chance rates will reach 1.5% by year end.

These expectations could be bolstered by the U.S. consumer
price index due Thursday.

The dollar index climbed 0.1% to 95.483, off the
95.136 touched last week before the labour market numbers.

U.S. two-year yields held firm after briefly
touching a new a two-year high of 1.33%.

The U.S. currency dropped 0.2% to 114.94 Japanese yen
. Sterling slipped 0.1% to $1.3511 but both
currencies remained in the middle of their recent ranges.

Markets will be watching scheduled speeches by policymakers
at the Fed and the UK, European, Australian and Canadian central
banks this week, to see whether they drop any further hints on
rate policy.

Bitcoin rose 0.7% to $42,715 after jumping 11%
late on Friday.

(Reporting by Tommy Wilkes
Editing by Frank Jack Daniel and Mark Heinrich)
All content is for education purpose only, not financial advices.

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