Euro Plummets to Below $1.08 Despite Lagarde’s Comments

ECB Signals Further Raise to Interest Rates for Lower Inflation

Christine Lagarde, the president of the European Central Bank (ECB), has expressed willingness to raise interest rates further to help lower inflation in her recent speech at the World Economic Forum in Davos.

The euro was trading at $1.0792, at 4:00 p.m. GMT, compared with the $1.0840 value at the end of European currency market the day before. The ECB had set the exchange rate for euro at $1.0815. Lagarde cautioned that inflation was still “too high” and based on records of the December Governing Council meeting, the interest rates have already been raised by 50 basis points with a commitment to enlarge the rate further.

Rumors suggesting a smaller increase of the interest rate in March only resulted in weakening the euro, while in the US, fears of a recession cause the drop of US Treasury debts. This week’s weekly jobless claims however showed signs of robust US economy.

The housing market too witnessed a decline in starts and permits in December, which is why the Federal Reserve members declared in favour of a single point at the next meeting. The euro fluctuated between $1.0782 and $1.0833 during the trading session.

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