The European Central Bank's latest comments on inflation have lobbed another grenade in the path of the euro.
Already down over 7% to the dollar this year, the euro tumbled against every major currency after ECB President Christine Lagarde on Monday effectively quashed money markets' expectations of a 2022 interest rate rise. Tightening policy now would only choke off economic recovery, she said.Her stance pits the euro against peers which are backed by policy-tightening expectations -- in the British pound's case, a rate rise may come as soon as next month. Markets also see the U.S.
The single currency is at a 16-month low versus the dollar of around $1.13. Against the pound it is holding near levels not seen since the start of the pandemic, while compared to the Australian dollar it is nearing March lows . For Europe, a 2022 rate hike always seemed a tall order despite inflation running above the ECB's 2% target, while a recent spike in COVID-19 cases risks setting back growth.
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