Euro dips after 3-day rise ahead of ECB meeting – NewsBreak

Feb 3 (Reuters) – The euro fell on Thursday after a three-day rise on expectations that the European Central Bank might signal faster-than-expected monetary tightening, while souring risk appetite provided further support for the dollar.

The ECB is all but certain to keep policy unchanged on Thursday but may be forced to acknowledge that inflation could stay high for longer than it had projected, a signal that some may take as a hint at a faster exit from stimulus. read more

If ECB President Christine “Lagarde sticks to this tactic (talking down inflation) in the press conference, the euro will continue to lose value,” said Moritz Paysen forex and rates advisory at Berenberg, describing the euro’s current negative real interest rate of 5.6% – nominal euro zone interest rates minus headline inflation – as “permanently poison for a currency”.

“In the event that the ECB president holds out the prospect of serious monetary tightening, I can very well imagine a revival of the euro,” he added.

The euro was down 0.2% at $1.1277, after rising around 2% in the last three sessions.

Meanwhile, a slump in tech stocks on Wall Street soured risk appetite supporting the greenback, with the risk-sensitive Australian and New Zealand dollars falling slightly.

Nasdaq futures fell more than 2% as Facebook owner Meta Platforms Inc’s (FB.O) shares plunged more than 20% late on Wednesday on a weaker-than-expected forecast. read more

The U.S. dollar index , which measures the greenback against six rivals, was 0.2% higher to 96.230, after falling for three days in a row.

“The bigger challenge to the dollar has come from overseas, particularly in Europe,” ING analysts said.

“Stubbornly high inflation here is prompting a re-assessment of the amount of patience the likes of the ECB can show. And the re-pricing of the ECB cycle is providing support to European currencies in general,” they added.

Sterling will also be in the spotlight as the Bank of England looks set to raise interest rates on Thursday and signal a further unwinding of its pandemic stimulus. read more

The pound was flat against the euro while falling 0.3% versus the dollar .

Policy decisions from the Bank of England (BoE) and European Central Bank (ECB) are due at 1200 GMT and 1245 GMT respectively, and a news conference with ECB President Christine Lagarde is scheduled at 1330 GMT.

Bitcoin fell 1.3% to trade around $36,414, while ether , the world’s second-largest cryptocurrency, was down 3% at $2,601.

Reporting by Stefano Rebaudo, Editing by Bernadette Baum

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