(New York) The euro fell to its lowest level in 16 months on Monday, undermined by accommodating comments from several European Central Bank (ECB) officials as well as the resurgence of coronavirus cases in Europe.
The single currency retreated to $ 1.1378 per euro, the lowest since July 17, 2020.
Going under $ 1.14 for one euro “was only a matter of time,” said Kathy Lien, director of foreign exchange strategy at BK Asset Management. “The fundamentals are there. “
Around 2:10 p.m., the dollar consolidated its advance and was trading at 1.1387 dollars to the euro.
Currency traders were worried about what is looming as a new wave of the pandemic in Europe, where some countries have put in place containment measures, mostly aimed at unvaccinated people.
And the euro received two new banderillas on Monday, the first coming from the president of the European Central Bank (ECB), Christine Lagarde, who said, during a hearing before the European Parliament, that a rate hike in 2022 was “very unlikely”.
She still considers, like the institution, that the “medium-term inflation outlook remains modest” in the euro area, the ECB expecting 1.5% for 2023, less than its target of 2%.
Also on Monday, ECB Vice-President Luis de Guindos defended the short-term maintenance of an accommodating monetary policy to allow the conditions for economic recovery.
“Differences in monetary policy are becoming an important catalyst in the foreign exchange market,” Kathy Lien summed up.
While the ECB is staying the course, the American Central Bank (Fed) gave, at the beginning of November, the signal of the start of monetary normalization and no longer excludes raising its rates in 2022.
The majority of traders even envision an even faster pace of tightening in the United States to cope with the inflationary surge.
“We have retail sales tomorrow (indicator for October in the United States), which are expected at a high level, and gasoline prices which are at their highest for seven years,” recalls the analyst, “therefore investors are positioning themselves for good indicators that are consistent with the direction of the Fed. “
“And there you have the ECB which confirms the status quo,” she continues. “It was the last straw that broke the camel’s back. “
The euro was also in arrears against the Swiss franc, which climbed Monday to 0.9512 euro against a Swiss franc, a high for 18 months.