Home Daily Commentaries EURUSD rises after European Central Bank hikes rates

EURUSD rises after European Central Bank hikes rates

Thursday 21 July, 2022

Daily Currency Update

The European Central Bank (ECB) raised interest rates for the first time since 2011 on Thursday, finally joining many major central banks in taking action to curb inflation that's at multi-decade highs. The ECB hiked interest rates by 50 basis points, bringing the deposit rate to 0% and the main rate to 0.5%. This was a bigger move than widely expected, especially with the ECB's previous guidance. Like the Bank of England, the ECB is in a tricky position of having to fight inflation while its economy slows in the face of uncertainty over its supply of energy from Russia. The euro jumped against the US dollar, breaching past 1.02 shortly after the decision. However it has slipped back below 1.02 again, trading around 1.0194 at the time of writing.    

Key Movers

The pound weakened against the US dollar and the euro on Thursday following the ECB interest rate decision.  On Wednesday, UK headline inflation was reported at 9.4% in June, slightly higher than expected. The Bank of England expects headline inflation to reach 11% later this year after energy companies increase prices. GBPUSD was down 0.13% trading at 1.1963 at the time of writing. The Australian dollar rose against the US dollar slightly as the US dollar remained broadly on the back foot on Thursday. This week, the Reserve Bank of Australia (RBA) governor Philip Lowe said that further interest rate hikes are needed while stating that the bank needs to “chart a credible path back to 2-3%” inflation, in which unemployment persists at lows while the economy grows. The RBA has raised rates by 125 basis points since May, and some analysts expect the RBA will move to the newest threshold of 75 basis points in the August meeting to match the US Federal Reserve decision in June. AUDUSD was trading at 0.6898 at the time of writing.    

Expected Ranges

  • EUR/USD: 1.016 - 1.0271 ▲
  • GBP/USD: 1.1909 - 1.2 ▼
  • AUD/USD: 0.686 - 0.6915 ▲
  • USD/CAD: 1.286 - 1.2929 ▲