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ECB hikes Eurozone out of negative interest rates

ECB hikes Eurozone out of negative interest rates

All eyes were on the ECB monetary policy meeting yesterday as the central bank raised rates by more than anticipated (50bps), bringing an end to the negative interest rates regime in the Eurozone. The ECB also decided to scrap forward guidance which is likely to see increased volatility on interest rate markets and for the euro in the coming months. Indeed, following the ECB’s decision to hike rates by more than expected, there was some volatility for the euro. EUR/USD initially climbed higher, rising to a peak of $1.027, before falling to a low of $1.016. EUR/GBP traded up to a brief high of 85.8p, before settling back in the lower half of the 85-86p corridor. 

Elsewhere on the currency front, GBP/USD operated within the $1.19-1.20 range. Meanwhile, the re-opening of the Nordstream gas pipeline provided some relief to market sentiment. Benchmark gas and oil prices fell by around 2-3%.

Looking ahead today, the flash July PMI readings for the US, Eurozone and UK are due which could lead to volatility in the aforementioned currencies. The UK prime ministerial race also continues, keeping sterling traders on edge.

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