Euro rebounds ahead of ECB meeting, Polish zloty and Hungarian forint surge

A picture taken April 18, 2007 in London shows a woman holding euro and US dollar banknotes.

Bertrand Langlois | AFP via Getty Images

The euro rose on Wednesday, briefly approaching $1.10, buoyed ahead of this week’s European Central Bank meeting by reports that European Union countries were discussing a joint bond issue to fund energy and defense spending.

After hitting a 22-month low of $1.0806 on Monday, the euro stood at $1.0968 as of 7:20 a.m. ET, up 0.7% on the day, after a report citing Anonymous officials said the EU was discussing a joint bond issue.

European currencies such as the Polish zloty and the Hungarian forint rose sharply, rebounding from record lows against the euro, also supported by both central banks which raised rates on Tuesday.

The ECB meets on Thursday, but amid the specter of stagflation, money markets expect policymakers to delay rate hikes until the end of the year.

“European currencies have been under severe pressure over the past two weeks and some of these valuations have started to look stretched,” said Jane Foley, head of FX strategy at Rabobank in London.

“News that the EU is considering issuing debt to fund energy and defense spending has buoyed the euro and helped spark a better tone for the euro and European currencies,” she said. added.

The pound rose 0.4% against the dollar at $1.3148, the Polish zloty jumped 1.8% against the greenback at 4.3808 and the Hungarian forint jumped 2.8% at 345.80.

Analysts said the euro is unlikely to make much headway amid so much concern over the war in Ukraine, while expectations of a Federal Reserve rate hike and safe-haven demand suggest that the US dollar should not yield too much ground.

Against a basket of currencies including the euro, the dollar fell 0.5% to 98.628, to just below a 22-month high reached on Monday.

“While uncertainty surrounding the military conflict but also energy prices remain high, volatility in the foreign exchange market is also not expected to subside, leaving the US dollar the advantage as a safe haven” , said Antje Praefcke, FX analyst at Commerzbank.

In the meantime, commodity prices are expected to boost currency trading, with oil rising again after the United States said it would ban imports of Russian oil.

The Norwegian krone rose 0.6% against the dollar to 8.9235, the Brazilian real jumped 0.6% to 5.0300 and the Canadian dollar rose 0.45% to 1.2833.

Cryptocurrencies also rose on speculation that the White House could soften its combative approach to digital assets. Bitcoin was last up 10% at $42,330 and Ether was up 7% at $2,760.

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