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Euro Volatility Soars Following ECB's Hawkish Statement

Currency exchange in Europe has been volatile following the hawkish statement from the European Central Bank (ECB) this week.

After President Christine Lagarde declared that more interest rate hikes would be necessary to combat inflation, the euro surged before dropping on Thursday as investors cashed out. On the same day, the U.S. dollar gained steam due to a lack of risk appetite as stocks dropped.

The ECB raised rates for the fourth time consecutively, with Lagarde emphasizing the need for continued tightening. Meanwhile, U.S. Federal Reserve Chairman Jerome Powell maintained a hawkish tone as he urged for further increases, although data revealed that retail sales fell more than expected in November and the labor market remains tight.

The British pound was also down after the Bank of England increased its key interest rate to 3.5%, with yet further hikes likely. Moreover, Norway's central bank raised its benchmark rate to 2.75% - the highest in 13 years - and pledged further hikes in the first quarter of 2023 as inflation continues to remain above its target. The Swiss franc was lower as well, following the Swiss National Bank's decision to raise its policy interest rate by 50 basis points to 1%.

At 11:15AM (1615 GMT), the dollar index stood at 104.42 while the euro traded at $1.0643; the dollar/yen pair was valued at 137.7150; the euro/yen pair was 146.58; the dollar/swiss was 0.9290; sterling/dollar was $1.2208; dollar/canadian was 1.3632; and aussie/dollar was $0.6707. The euro/swiss was 0.9886; euro/sterling was 0.8715; NZ dollar/dollar was 0.6349; dollar/norway was 9.8460; euro/norway was 10.4842; dollar/sweden was 10.3222; and euro/sweden was 10.9843.