The euro’s downswing continues, as the currency is down for a fifth straight day. Currently, EUR/USD is trading at 1.1341, down 0.22%. Earlier in the day, the euro fell to 1.1328, its lowest level since July 20th.
Lagarde says no rate hike before 2023
The ECB does not have any plans to raise interest rates, but the bank has signalled that it will wind up the pandemic asset purchases in March, and last week, ECB member Robert Holzmann urged the ECB to wind up its conventional bond purchase scheme. However, ECB President Christine Lagarde continues to push back on calls to tighten policy, and said on Monday that such measures “could cause far more harm than it would do any good” and said she could not envision a rate hike before 2023. Lagarde admitted that inflation will be higher and last longer than anticipated, but insisted that it will cool off in 2022, so any tightening would take effect just as inflation moderated on its own.
In the other corner of the ring, the head of Deutsche Bank, Christian Sewing took issue with Langarde’s stance on interest rates and inflation. Sewing said that he disagreed that inflation was transient, adding that the policy of low interest rates had “lost its effect”, and called for central banks to tighten policy and take measures against surging inflation.
In the US, retail sales rose in October by 1.7% m/m, the highest level in seven months. This was up from 0.8% in September. Core retail sales also rose 1.7%, up from 0.7% a month earlier. Both readings were higher than expected and indicated that US consumers were in spending mode even with inflation running at its fastest clip in some 30 years. With the labor market gaining strength and the pandemic situation improving, we can expect consumer spending to continue to be strong in the fourth quarter.
- 1.1320 is under pressure in support. This is followed by 1.1207
- 1.1382 is a weak resistance line. Above, there is resistance at 1.1557
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