LONDON, Oct.29 (Reuters) – The euro’s losses deepened on Friday, falling to almost half of its gains in the previous session, as eurozone inflation beat expectations this month- ci to match its all-time high, creating a political dilemma for the European Union. Central bank.
The single currency, which largely struggled against rivals on Friday, slipped more than a year against the Swiss franc as Italian bond yields resumed their rise a day after the European Central Bank adopted a dovish note at the meeting. ‘a political meeting.
President Christine Lagarde’s failure to push market expectations for higher interest rates has made the bears stand out, Danske Bank strategists expecting the euro to fall to $ 1.10 over the next 12 months, stating “if inflation proves to be more sustainable, today’s comments make us less confident that the ECB will not change its key forward rates.”
Data on Friday showed inflation in the 19 countries sharing the euro rose to 4.1% in October from 3.4% a month earlier, beating a consensus forecast of 3.7%. This reading is the highest since 2008 and equals the time series record launched in 1997.
“Investors just don’t buy what the ECB says,” said Marios Hadjikyriacos, senior investment analyst at Brokerage XM.
“With inflation expectations turning ballistic, markets are betting the central bank will be forced to step down sooner, first by cutting asset purchases and then with tiny rate hikes.”
Money markets are almost fully anticipating a 10bp rate hike from the European Central Bank by July 2022 and nearly two rate hikes by October 2022. A week ago, markets were barely anticipating a hike of rate by October 2022 and less than half a rate. hike by July 2022.
Major currencies did not benefit from surging short-term government debt yields globally, as investors assessed the likelihood that central banks could fall behind in containing growing inflationary pressures perceived to be transients.
On Friday, the single currency slipped 0.1% against the dollar to $ 1.1674. It reached its lowest level against the Swiss franc since July 2020 at 1.0625 francs per euro.
Elsewhere, the dollar index, which measures the currency against six major rivals including the euro, edged up 0.1% to 93.462, but remained close to Thursday’s low of 93.277 – an all-time high. seen since September 27.
The Australian dollar eased 0.1% to $ 0.7537, after hitting its highest level since early July at $ 0.75555 in the previous session.
In cryptocurrencies, Ether hit a record high of $ 4,400, while bigger rival bitcoin also gained around $ 61,200, but down from the record high of $ 67,016.50 reached last week. .
Reporting by Saikat Chatterjee; Editing by Angus MacSwan and Raissa Kasolowsky
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