The US dollar fell once morest the euro on Wednesday, following the decision of the US Central Bank (Fed) to raise, as expected, interest rates by half a percentage point without firmly considering a more severe tightening.
A rate hike of 0.75 percentage points “is not firmly considered” at this time by the US central bank’s Monetary Committee (Federal Reserve, Fed), Fed Chairman Jerome Powell said reassuringly. markets which had already discounted the 0.50 hike announced on Wednesday.
“In the end the Fed was not as + hawk + as that”, commented Joe Manimbo of Western, that is to say as severe as some investors apprehended.
“It shows up in the fact that the Fed seems to be ruling out a 0.75 percentage point hike,” Manimbo said.
However, the Fed signaled that further increases in the cost of credit would be justified and that increases of 50 basis points remained “on the table” for the next two meetings of the Monetary Committee, in June and July.
“That begs the question for September, we’ll have to see the data, if inflation moderates,” commented the Western Union analyst.
Around 7:35 p.m. GMT, the dollar, which was slightly down before the announcement of the monetary decision, yielded 0.86% to 1.0612 dollars for one euro, the European currency returning to the threshold of 1.06.
The Dollar Index, which compares the greenback to a basket of other currencies, fell 0.68% to 102.76 points.
The greenback has thus been catching its breath since the start of the week, following gaining nearly 5% in April once morest the single European currency.
Bond yields fell sharply, that on two-year bills falling to 2.64% once morest 2.78% the day before. The yield on ten-year Treasury bills fell to 2.92% instead of 3% earlier in the session.
The Stock Exchange was picking up once more, the indices soaring by more than 2% following Jérome Powell’s press conference.
On the European side, Brussels has proposed to stop European imports of Russian oil within six months, European Commission President Ursula von der Leyen announced on Wednesday.
Investors will also watch Thursday’s meeting of the Bank of England (BoE), which should raise its rates by 0.25 points to 1%.
Local elections in the UK on Thursday might also influence the pound, said Guillaume Dejean, an analyst at Western Union. “A surge of nationalists in Northern Ireland and Scotland might weaken the cohesion of the region and revive cries for independence,” he notes.
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