EUR jumped to its one-month high against USD after ECB hinted that rising inflation could force it to raise interest rates as soon as next year. During its latest meeting, ECB left the interest rates and asset purchases unchanged, just as expected. However, Governor Christine Lagarde hinted that inflation may stay for a longer period, a comment that has led investors to believe that rate hikes may come soon.
The FX markets have become volatile around central banks’ activities recently. Bigger moves started on Wednesday with hawkish comments from the Bank of Canada. On Thursday, the Reserve Bank of Australia has declined to purchase the April 2024 target bond, despite that the yield was much higher than the 0.1% target. This has somehow indicated that the RBA had abandoned its yield target, sending AUD to its highest level since July 6th.