Speculations on a stronger interest rate hike in the euro zone than previously assumed pushed the common currency well above parity with the dollar at times on Friday. The euro peaked one US cent at $1.0094, but gave up gains by the evening and fell back to $0.9999. According to insiders, some monetary watchdogs at the European Central Bank want to discuss a particularly sharp rate hike at the interest rate meeting in September due to deteriorating inflation prospects. Arguments for this are provided by the example set by the US Federal Reserve, which recently raised interest rates sharply twice in a row. Fed Chair Jerome Powell’s speech at the central bank meeting in the USA also signaled that monetary policy would remain tight as iron. Uninterrupted inflation in the euro area also speaks for a more significant interest rate hike than before. Speculations about a prolonged tight monetary policy caused price losses on the bond markets. Conversely, the yield on Germany’s 10-year Bund rose to a two-month high of 1.425 percent, while that of its Italian counterpart rose 17 basis points to 3.72 percent.
In the meantime, the mood to buy in Germany has fallen to a record low in view of rising energy prices and high inflation. There is currently no end in sight to the galloping prices for gas and electricity. The TTF futures contract on the energy exchange in Amsterdam, which is trend-setting for European gas trading, was temporarily quoted at EUR 343 per megawatt hour. It was just a hair’s breadth below the record high of EUR 345, which it reached in March shortly after the outbreak of the Ukraine war.
Fears of a lack of gas deliveries from Russia further fueled the gas price rally.