The euro slipped from two-week highs on Wednesday, as investors braced for a crucial European Central Bank policy meeting on Thursday after policymakers floated the prospects of a 50 bps interest rate hike.
EUR has rallied more than 3% in the last four trading sessions on expectations the European Central Bank (ECB) could deliver a big 50-bps rate hike. Reuters reported that a key Russian gas pipeline would reopen on time after maintenance.
But investors’ mood turned sour on Wednesday with European stock markets in the red and U.S. stock futures pointing to a rocky start and weighing on the single currency.
On Wednesday the currency firmed as much as 0.5% to $1.02730, the highest since early June, before easing off those levels and weakening 0.4% to $1.0173.
Both events – the ECB meeting and the reopening of the Nord Stream 1 conduit after a 10-day shutdown – are due on Thursday, leaving markets on tenterhooks.
The event risks lifted short-dated euro-dollar implied volatility, a gauge of expected swings, to 14%. It touched March 2020 highs above 14.6% on Tuesday.
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