©Reuters. Euro falls below $1.0650 ahead of Fed minutes
Frankfurt (Germany), May 25 (.).- The euro fell this Wednesday below the level of 1.0650 dollars before the Federal Reserve (Fed) publishes the minutes of its last monetary policy meeting and before the signs economic slowdown.
The euro was trading at $1.0680 around 3pm GMT, versus $1.0725 in late European forex trading the previous day.
The European Central Bank (ECB) set the reference exchange rate for the euro at 1.0656 dollars.
Some figures for the US economy were worse than expected. Incoming orders for durable goods rose by 0.4% in the US in April.
Concerns are mounting in the markets over tensions between the US and China after US President Joe Biden said they will respond militarily if Beijing tries to take the island by force.
The ECB warned in its Financial Stability Report of May 2022 that “an abrupt rise in interest rates may induce corrections in real estate market prices”.
Several members of the Governing Council of the ECB have publicly declared themselves in favor of raising interest rates abruptly or gradually.
ECB President Christine Lagarde confirmed in a blog on Monday that the European institution will start raising interest rates in July, saying the euro zone will emerge from negative interest rates by the end of the third quarter (now the deposit facility is at -0.50%), statements after which the euro shot up.
The members of the Governing Council currently differ on whether it is better to raise interest rates gradually, that is by 25 basis points, or more abruptly, by 50 basis points already in July.
Austrian National Bank Governor Robert Holzmann is in favor of a 50 basis point interest rate hike in July, as is Dutch central bank De Nederlandsche Bank President Klaas Knot.
However, the Governor of the Bank of France, Francois Villeroy de Gallhau, said that a rise of 50 basis points is not the consensus at the moment in the Governing Council of the ECB and that the rises in interest rates will be gradual, which which means steps of 25 basis points.
The Italian Fabio Panetta indicated today in Frankfurt that they should “gradually normalize monetary policy” and the governor of the Bank of Finland, Olli Rehn, also said he was in favor of an increase of 25 basis points in July due to the high uncertainty in the economy due to the consequences of the war in Ukraine.
The Vice President of the ECB, Luis de Guindos, commented that the pace of interest rate increases will depend on the situation and that we will have to wait and see what happens.
The single currency was traded in a trading band between 1.0642 and 1.0739.
