The euro on Friday fell after economic data painted a mixed picture for growth and inflation across the eurozone, raising uncertainty around the size of the European Central Bank’s (ECB) expected interest rate hike next week.
Preliminary data showed that GDP in the eurozone expanded by 0.1 percent in the first quarter, below expectations in a Reuters poll for 0.2 percent.
The eurozone’s two largest economies, Germany and France, stagnated or barely grew, while the Spanish and Italian economies expanded more than expected.
Photo: Bloomberg
A flood of inflation data releases were also mixed.
“The euro is under pressure today as core inflation data out of France and Spain didn’t reach the burden of proof required to force the ECB into a 50bp [basis point] hike next week,” Monex Europe foreign exchange analysis head Simon Harvey said.
The euro fell 0.11 percent to US$1.1019, but remained near its recent one-year high, buoyed by expectations that the ECB still has further to go in raising interest rates, analysts said.
After the economic data, traders increased their bets that the ECB would hike by 25 basis points, rather than 50, next week, Refinitiv data showed.
The IMF on Friday called on the ECB to keep raising interest rates until the middle of next year to help bring down high inflation.
Versus the yen, the euro briefly rose to its highest level since December 2014 at ￥149.50. It closed up 1.61 percent at ￥150.2 after the Bank of Japan (BOJ) left its ultra-easy monetary policy unchanged even as it scrapped a pledge to keep interest rates low.
At Governor Kazuo Ueda’s first policy meeting, the bank said it would maintain ultra-low interest rates as expected, and unanimously decided to make no changes to its yield curve control policy.
However, the central bank removed a pledge to keep interest rates at “current or lower levels” and said it would “conduct a broad-perspective review of monetary policy.”
The yen fell sharply, also against the US dollar, down 1.72 percent to ￥136.31, its lowest since March 10.
“The hopes of a policy change have been somewhat dampened by the review,” Bank of Singapore currency strategist Moh Siong Sim said, adding that the likely length of the review might have cooled hopes for an imminent move in policy settings.
“For now, the outcome is read as dovish,” he said.
The New Taiwan dollar fell NT$0.030 against the US dollar to close at NT$30.740, down 0.38 percent from a week earlier.
Additional reporting by staff writer, with CNA
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