The euro strengthened on the foreign exchange markets today, recovering from a two-month low. This was helped by a statement from European Central Bank (ECB) President Christine Lagarde, who said that inflation in the eurozone remains too high and that monetary policy will therefore need to be tightened further.
Euro to dollar
Around 18:00 CET, the single European currency added 0.6 percent to the dollar to $1.0753. The dollar index, which measures the value of the dollar against a basket of six major world currencies, showed a 0.7 percent decline to 103.62 points at the same time.
The annual inflation rate in the eurozone fell to 6.1 percent in May from seven percent in April, statistics office Eurostat said in a flash estimate. The pace of price increases is the slowest since last February.
Inflation plays a part
“Inflation is currently too high and is likely to remain so for too long,” Lagarde commented on the statistics. “We have made it clear that we have a lot of work to do to get interest rates to a sufficiently restrictive level,” she added.
The ECB started raising interest rates last July. It last raised the key interest rate in early May by a quarter percentage point to 3.75 percent. Markets are leaning towards the ECB raising interest rates by a quarter percentage point in mid-June, according to Refinitiv. They expect another hike in July, again by a quarter percentage point.