Euro’s Interest Rate Advantage Expected to Fade by Year-end

Today’s hawkish comments by ECB President Lagarde gave the euro (^EURUSD) a small boost.  However, the markets are expecting the ECB to be done tightening monetary policy by this autumn or winter, which would eliminate the euro’s current interest rate advantage.

At the ECB’s retreat in Portugal, ECB President Lagarde today said, “It is unlikely that in the near future the central bank will be able to state with full confidence that peak rates have been reached.  Barring a material change to the outlook, we will continue to increase rates in July.”