Euro Climbs As ECB Raises Key Rates, Signals More Hikes

(RTTNews) - The euro strengthened against its major rivals in the European session on Thursday, as the European Central Bank lifted its key interest rates by 50 basis points and signalled further tightening on account of an upward revision to the inflation outlook.

The Governing Council, led by Lagarde, raised the main refinancing rate to 2.50 percent, the deposit facility rate to 2 percent and the marginal lending rate to 2.75 percent. The move was in line with economists' expectations. The move was in line with economists' expectations.

The bank said that interest rates would be raised further as inflation remained high and would stay above the target for too long.

The Governing Council noted that it would announce the detailed parameters for reducing the APP holdings at the meeting in February.

Eurosystem staff revised up their inflation projections. The staff now sees the headline inflation rate at 8.4 percent this year, 6.3 percent in 2023, 3.4 percent in 2024 and 2.3 percent in 2025.

The ECB staff expects "a recession would be relatively short-lived and shallow."

Data from Destatis showed that German wholesale price inflation eased in November to reach its lowest level in more than a year.

The wholesale price index climbed 14.9 percent year-over-year in November, slower than the 17.4 percent surge in October. Prices have been rising since January last year.

Extending its early rally, the euro touched a 5-week high of 146.51 against the yen. The pair was worth 144.71 when it ended deals on Wednesday. If the euro rises further, it may locate resistance around the 150.00 level.

The euro appreciated to 0.8700 against the pound, its strongest level since November 23. The euro-pound pair had finished yesterday's trading session at 0.8595. The euro may seek resistance around the 0.90 level.

The euro was higher against the franc, at a fresh 5-week high of 0.9917. At Wednesday's close, the pair was valued at 0.9874. The currency is likely to face resistance around the 1.04 region.

The euro firmed to more than a 6-month high of 1.0736 against the greenback, from a 2-day low of 1.0606 seen at 4:15 am ET. The pair had closed Wednesday's deals at 1.0682. Next key resistance for the euro is likely seen around the 1.11 level.

The euro advanced to more than a 10-month high of 1.4593 against the loonie from yesterday's closing value of 1.4466. The euro is likely to face resistance around the 1.48 region, if it rallies further.

The euro was up against the kiwi, at more than a 2-week high of 1.6794. At yesterday's trading close, the pair was quoted at 1.6538. Further rally may take the euro to a resistance around the 1.69 area.

The euro moved up to a 10-month high of 1.5884 against the aussie from yesterday's closing quote of 1.5561. Next immediate resistance for the euro is seen near the 1.61 level.