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All eyes focused on the ECB on Thursday, amid a series of events taking place in the European Union. The most relevant was the central bank’s monetary policy decision on hiking rates by 50 bps, the first hike in over 11 years, and the awaited move away from negative rates.
The US dollar advanced after the ECB’s decision, but easing US Treasury yields limited its gains. The EUR/USD pair finished the day just below the 1.0200 threshold. GBP/USD settled at around 1.1975.
The main challenges that forced the ECB into taking more aggressive action were the continent’s hot inflation in addition to the impact of the ongoing conflict with Russia over the invasion of Ukraine.
Commodity-linked currencies posted modest gains against the dollar, with AUD/USD trading at 0.6910 and USD/CAD at 1.2880. Safe-haven JPY and CHF posted substantial gains vs their American rival.
Economic Data
Thursday featured no release of significant economic data during the US trading session.
Other Developments
Italian Prime Minister Mario Draghi effectively resigned, and elections will be held in September. Italian President Sergio Mattarella has dissolved the Italian parliament, opening the door for election on September 25.
US stocks managed to post modest gains, which put further pressure on the dollar. Crude oil prices remained under pressure, with WTI settling at $96.30 a barrel. Gold advanced and finished the day at $1,717 a troy ounce.
Russia’s Gazprom resumed gas flows to the EU through the Nord Stream 1 pipeline. The German Energy Regulator noted that the pre-maintenance level of 40% capacity could be exceeded on this first day, providing additional relief to EUR buyers.
The focus on Friday will be on growth-related figures, as S&P Global will publish the preliminary estimates of the July PMIs.
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