• Home
  • Blog
  • Euro Looks To Become The Market S Preferred Currency

Euro looks to become the market's preferred currency

Interesting comments from National Bank of Belgium's Pierre Wunch today..



"The market is underestimating the scale of incoming interest rate hikes, as inflation will unlikely fall back to acceptable levels unless wage growth retreats". Mr Wunch who sits on the ECB's interest rate-setting Governing Council spoke with the Financial Times this morning and also suggested he 'wouldn't be surprised if we had to go to 4% at some point".

These are not surprising comments as we have heard the narrative many times recently, but it feels like the stars are aligning somewhat to what the ECB will end up doing near-term. Last month, ECB President Lagarde said higher wages were one of the factors that is driving inflation higher. This was after wages in the Euro-Zone increased at a record pace as companies increased pay to retain and attract staff

At the moment, the Fed and the BoE are likely to raise interest rates higher than the ECB as they both started much sooner. The market though is expecting more rate hikes from the ECB compared to the others in the coming months, which will mean a stronger € to come. 

The outlook is looking positive for the Euro-Zone as the region's economic picture is improving steadily. The Euro therefore follows, whilst already being one of the better performing currencies this year after energy prices subsided recently. It looks like the purple-patch for the single currency is about to begin..