Euro edges higher, focus on ECB tightening path By Reuters

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© Reuters. FILE PHOTO: U.S. one dollar banknotes are seen in this illustration taken February 8, 2021. REUTERS/Dado Ruvic/Illustration//File Photo

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By Stefano Rebaudo

(Reuters) – The euro edged up on Thursday as investors price in the chance of an aggressive near-term tightening path by the European Central Bank, while the safe-haven dollar took a breather after significant gains in the previous sessions.

Money markets are currently pricing in 106 basis points (bps) of ECB rate hikes from around 95 bps on Tuesday before ECB official Klaas Knot signalled a 50-basis-point rate increase was possible in July.

U.S. money markets, meanwhile, are still discounting around 200 bps of Fed rate hikes by December 2022.

Risk appetite in the currency market is fragile as stocks slid, tracking a steep Wall Street selloff, with investors worrying about global inflation and the Ukraine war.

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