London (Reuters) – Even though the euro went down on Tuesday, it was still on track to have its best month in a year. This is because high inflation data will make people more likely to expect the European Central Bank to raise interest rates (ECB).
German consumer prices went up by a huge 8.7%, and Spanish inflation rates kept going up. This sets the stage for more record inflation data for the eurozone as a whole in May, with a Reuters poll predicting a reading of 7.7%.
Since the European Union has decided to cut 90 percent of its oil imports from Russia by the end of this year, inflation is unlikely to be tamed anytime soon, even though markets anticipate 115 basis points of rate hikes in the final six months of 2022.
Adam Cole, tchief currency strategist at RBC Capital Markets, said, “The risk to the aggregate data for the eurozone is very much to the upside.” “When the ECB’s next set of staff forecasts comes out in June, the near-term inflation path is likely to be changed in a big way to the upside.”
The euro was worth $1.0737, which was 0.4% less than it was the day before. Overnight, it hit a five-week high of $1.0786. In May, the euro is expected to rise by 2.2%, which would be its biggest monthly gain in a year.
Overnight, the euro went up, which helped the dollar. The dollar also got a boost from a rise in U.S. Treasury yields.
The dollar index was at 101.71. Overnight, it fell to 101.29, which was the lowest level in five weeks.
On Monday, news came out that the leaders of the European Union had agreed in principle to stop buying most of their oil from Russia by the end of this year. This made oil prices go up and helped commodity currencies.
Before Wednesday’s Bank of Canada meeting, at which all 30 economists polled by Reuters expected a 50-basis-point rate hike to 1.50 percent, the Canadian dollar reached 1.2653 per dollar, which was close to its highest level in a month.
At around $31,600, Bitcoin was in the lead. Overnight, it went above $32,000 for the first time in more than three weeks.
