The European Central Bank (ECB) announced on Thursday that it would keep interest rates on hold, as expected. The ECB is concerned about the weakening European economy and the impact of the war in Ukraine.
The US Federal Reserve, on the other hand, is continuing to raise interest rates in an effort to combat inflation. The Fed raised interest rates by 0.75 percentage points on Wednesday, the third consecutive increase of that size.
The different approaches of the ECB and the Fed are reflected in the different yields on US and European government bonds. The yield on the 10-year US Treasury bond is now over 4%, while the yield on the 10-year German government bond is below 1%.
The higher yields on US government bonds are making the US dollar more attractive to investors. This is putting downward pressure on the euro and other currencies.
The ECB’s decision to keep interest rates on hold is likely to keep the euro weak in the near term. The Fed’s continued rate hikes are likely to put further downward pressure on the euro and other currencies.
Here is a summary of the key Takeaways:
The ECB kept interest rates on hold on Thursday, as expected.
The US Federal Reserve raised interest rates by 0.75 percentage points on Wednesday, the third consecutive increase of that size.
The different approaches of the ECB and the Fed are reflected in the different yields on US and European government bonds.
The higher yields on US government bonds are making the US dollar more attractive to investors, putting downward pressure on the euro and other currencies.
The ECB’s decision to keep interest rates on hold is likely to keep the euro weak in the near term. The Fed’s continued rate hikes are likely to put further downward pressure on the euro and other currencies.