The EUR/USD pair fell on ECB’s rate hike as expected, where inflation threats have moved to the upside over in the continent that struggles with debt and huge budget deficit. Portugal requested aid from the EU and IMF to help put a cap on budget deficit and reduce debt, causing the euro to depreciate against the dollar.
Note that Moody’s Investors Services downgraded Portugal’s credit rating by one-notch while setting the rate on review for further cut as prospects of gaining a bailout from EU-IMF intensified this week.
The ECB hiked rates by 25.0 basis points, along with increasing the Deposit and Lending rates by the same amount, taking them to 0.50% and 2.0 percent respectively.
Further bearishness is expected Friday as traders sell the dollar in favor of the euro, in addition the pair is expected to return to trade near 1.4100 – 1.4200 levels as lack of data from the US would keep eyes focused on UK’s PPI Reports (released at 08:30 GMT), which would provide a better picture on inflation levels ahead of the upcoming inflation report from the BoE.
The BoE preserved rates at 0.50 during Thursday’s rate decision along with keeping the APF program unchanged, despite that inflation rose to 4.4% last month, surpassing the desired rate set by the bank at 2.0 percent.
Originally posted here
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