The European Central Bank (ECB) raised interest rates by 50 basis points to slow inflation on Thursday. This strengthened the euro against the U.S. dollar, but in a volatile session, the euro lost some of its gains. The European Central Bank (ECB) has raised its benchmark deposit rate to 0%, joining other central banks worldwide. Earlier, the ECB had said it would only raise rates by 25 basis points.
The euro's initial rally sputtered after ECB President Christine Lagarde said the bank was speeding up its exit from negative interest rates but not changing the ultimate point of arrival.
Policymakers at the ECB approved a new plan to buy bonds. This will help the 19-country currency bloc's most indebted countries, like Italy, by reducing their borrowing costs and reducing financial fragmentation. The euro settled 0.09 percent higher at $1.0019 after reaching its highest level in nearly two weeks at 1.0279.
Michael Brown said that the euro's rise in response to the larger-than-expected hike is likely to be short-lived because of the rising risks of a recession in the economic bloc.
Last week, the euro fell to the same value as the dollar for the first time since 2002. Since then, it has recovered, thanks to rumors on the market that the European Central Bank will be more aggressive and to news from Reuters that the Nord Stream 1 gas pipeline will resume operations on time after ten days of maintenance.
The link operator reported that traffic had resumed on Thursday, and data from Germany's network regulator showed that capacity had returned to 40 percent of what it was before the maintenance.
Since Italy's Prime Minister Mario Draghi resigned on Thursday after the collapse of his national unity government, investors in the foreign exchange market have been keeping a close eye on the country. On the other hand, the dollar value against the yen was pretty stable at 138.21 yen after the Bank of Japan kept its ultra-easy policy settings as expected. By doing this, the Bank of Japan continued to go against the global trend of tightening monetary policy, even though it raised its inflation forecast.
Traders were keeping an eye on the race to replace Boris Johnson as British Prime Minister, which has narrowed down to former finance minister Rishi Sunak and foreign secretary Liz Truss. The pound fell 0.33 percent to $1.193 against the dollar. Bitcoin was about 3% lower at $22,543.49 a day after electric carmaker Tesla Inc said it had sold about 75% of its holdings of the virtual token.