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The EUR/USD pair is barely up 0.08% on Tuesday, following BoE’s Baily remarks, which deteriorated the market sentiment. During the European session, the ECB Chief Economist Philip Lane said that the ECB would impact the markets by hiking rates than selling its hefty pile of bonds on Tuesday. Given that the ECB raised rates from -0.50% to 0.75% in two months, expectations of another large size increase remained high.
The pair trims earlier gains, courtesy of a risk-off impulse spurred by remarks of BoE’s Governor Andrew Bailey after which the GBP/USD fell below 1.1000, while the EUR/USD followed, approaching the 0.9700 level.
At the time of writing, the EUR/USD is trading at 0.9704 after hitting a daily high nearby the 0.9770s mark, threatening to print a daily close below October’s 10 low of 0.9681.
Sentiment fluctuates, as reflected by the performance of US stocks, finishing Tuesday’s session mixed. BoE’s Governor Andrew Bailey startled investors when he said that UK’s pension funds have just 3-days to rebalance, saying that the bond emergent program was part of the BoE’s financial stability operations, not a monetary policy tool. Earlier, the BoE stepped in, buying inflation-linked government bonds.
On the US Front, Fed’s Vice Chair, Lael Brainard, said, “monetary policy will be restrictive for some time to ensure that inflation moves back to target over time.” She confirmed that the pace and size of further moves would be data-dependent.
In the meantime, the US Dollar Index, a measure of the greenback’s value against its peers, is slight up at 113.273, bouncing off the day’s lows on the risk-off impulse sparked by Bailey’s comments.
