The common European currency on Monday climbed to its strongest level since mid-August and broke away significantly from parity against the US dollar. The euro owes this mainly to the signals sent by the European Central Bank towards the intended monetary policy.
The euro rose as high as 1.0198 against the dollar in Monday’s trading, the strongest level since mid-August. On Monday alone, the euro rose 1.5 percent against the dollar, following Friday’s trading, when it rose 0.88 percent.
Opinion of an expert
“The position is changing, whereas previously the dollar was trending, now we are seeing comments from the European Central Bank that are very hawkish,” Jane Foley, head of currency pair trading strategy at Rabobank, told Reuters.
Which other factors might have contributed?
According to her, the current developments may also be influenced by expectations of current US inflation data. Indeed, there is a relatively high probability that the pace of price growth in the US will continue to ease, which would mean that the Federal Reserve may slow down its interest rate hikes. Contrary to that, the ECB is expected to tighten monetary policy more, which attracts investors to the euro.
