Today's meeting did not satisfy the expectation that the ECB could lend a helping hand to the euro by keeping it from plunging off a cliff. Europe has refused to accelerate monetary policy normalisation as most G7 countries have.
The single currency risks remaining under pressure
Currency market dynamics are always a comparison of relative strength. With a bigger blow to the economy from the events in Ukraine and no less of a problem with inflation, the single currency risks remaining under pressure due to a rapidly widening gap in interest rates in the euro area and beyond.
The Bank of England and the Bank of Korea have returned rates to pre-pandemic levels
The European Central Bank kept key interest rates unchanged and noted that the asset purchase programme would be scaled back and completed in the third quarter. Market participants expected these announcements. The main focus of market participants was on comments about further plans, and they are relatively mild, considering the external environment. The Fed is preparing the ground for a 50 point rate hike and the start of QE. The Bank of Canada and RBNZ already did so yesterday. The Bank of England and the Bank of Korea have returned rates to pre-pandemic levels.
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