Experts see the common currency’s fair value above current levels. A turnaround in interest rates by the ECB could trigger a move to the upside.
(Photo: Reuters)
Frankfurt Christine Lagarde made the observers of her press conference in early February wait a long time before she came out with the most important news. Journalists kept asking her the same question in different forms: Will the European Central Bank (ECB) raise interest rates this year? Unlike in December, the head of the ECB no longer described such a step as “very unlikely”.
The markets reacted promptly: the euro exchange rate rose sharply against the dollar. A week later, the European common currency held the gains.
It is still far from clear whether the ECB will actually initiate the turnaround in interest rates soon. If it does, it would be a historic move that offers upside potential for the euro. If interest rates rise in the euro area, it becomes more attractive for international investors to invest in bonds there. That tends to support the currency.
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