The euro rose slightly on Friday as traders noted European Central Bank policymakers’ calm approach to the euro’s recent appreciation, while the Norwegian crown surged on official forecasts the economy will now contract by less than predicted.
A two Euro coin is pictured next to an English ten Pound note in an illustration taken March 16, 2016. REUTERS/Phil Noble/Illustration
After a press conference on Thursday at which ECB President Christine Lagarde said the bank did not target the exchange rate, sources said policymakers had agreed to look through the euro’s rise, judging it was broadly in line with economic fundamentals.
Any advance higher in the euro may be curtailed, however, by ECB chief economist Philip Lane’s warning on Friday that a strong euro will further dampen price pressures.
“When market participants compare the tone of the ECB
with the Fed’s formal shift to allow greater inflation, the market remains encouraged to sell the dollar,” said Derek Halpenny, head of research at MUFG.
“But the euro/dollar correction back from 1.1900 after the ECB press conference does indicate that dollar selling may still have reached its limits for now,” Halpenny said.
In fact, the U.S. currency was poised for a second week of gains, an index which tracks it against major currencies showed =USD. The dollar gained overnight as jitters in U.S. equity markets had investors sticking to safer assets.
The euro was last trading up 0.2% at $1.1841 EUR=EBS, though it had reached $1.1917 the day before, an eight-day high.
The dollar index was stable at 93.22, while dollar/Japanese yen also was stuck at 106.19 JPY=EBS.
The Norwegian crown rose 0.8% to 9.0215 against the U.S. dollar NOK=D3 after the Norwegian statistics bureau now expects the economy to contract by 3.2% this year, less than the 3.9% drop predicted in June.
That prompted Norway to end its temporary relaxation of mortgage lending regulations at the end of September.
Against the euro, the crown rose by 0.4% to 10.6795 EURNOK=D3, though these moves were not enough to offset the falls on the back of oil price declines in the previous sessions.
Markets were looking to U.S. consumer price data due at 1230 GMT for an insight into the recovery and to the challenge facing the Federal Reserve as it looks to lift inflation. Economists polled by Reuters expected inflation to fall to 0.3% month-on-month in August from 0.6% the month before.
SEB analysts said there is less focus on inflation because of the Federal Reserve’s new, more relaxed stance on its 2% target.
Elsewhere, the pound advanced 0.3% to 1.2840 GBP=D3, but stayed flat versus the euro at 92.23 pence EURGBP=D3 after one of the heaviest selloffs seen this year sent the pound falling nearly 2% against the euro on Thursday.
Sterling was on course for its worst week since March, when forex markets were going through a coronavirus-induced turmoil.
The Brexit saga intensifies and the British currency may be poised for further losses as time is ticking for the UK to forge a trade deal with the European Union by the end of the year.
– Reuters