# Euro rises after Spanish CPI, dollar slips towards 8-mth low
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-30
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Euro Rises on Spanish Inflation Surge
Meta Description: Stay updated on the latest forex news as the euro gains momentum following strong Spanish inflation data, with expectations of a rate hike from the ECB.
URL: https://financedigest.com/euro-rises-after-spanish-cpi-dollar-slips-towards-8-mth-lowhtml

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By Samuel Indyk and Rae Wee

LONDON (Reuters) – The euro rose on Monday after unexpectedly high Spanish inflation data raised expectations for a higher euro area print on Wednesday, while the dollar languished near an eight-month low ahead of a slew of central bank meetings this week.

The euro climbed 0.2% to $1.0891 after data showing Spain’s consumer prices rose 5.8% in January compared with the same month last year, faster than the 5.7% on-year rise recorded in December and the first increase since last July.

Today’s [data will underline expectations for a 50 basis point hike from the ECB on Thursday and also signal that rates](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") will be moved further up,” said Niels Christensen, chief analyst at Nordea.

The U.S. dollar index, which measures the currency against a basket of its peers including the euro, was little changed at 101.88, having hit an [eight-month low](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") of 101.50 last week.

It was down more than 1.6% in January and on track for a fourth consecutive monthly loss, pressured by expectations that the Fed is nearing the end of its rate-hike cycle and that interest rates would not have to rise as high as [previously feared](https://www.financedigest.com/uk-economy-set-for-smaller-hit-in-2023-than-previously-feared-imf.html "UK economy set for smaller hit in 2023 than previously feared – IMF").

Movements were still relatively subdued ahead of policy meetings at the Fed, the European Central Bank (ECB) and the Bank of England (BoE) [later this week](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week").

The [euro has moved higher after the Spanish CPI data](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data"), but there’s also risk-off sentiment which should be slightly positive for the dollar,” Nordea’s Christensen said, noting that equity futures were lower in the U.S. and Europe.

I don’t expect euro-dollar to break [higher today or tomorrow ahead of the Fed](https://www.financedigest.com/asia-shares-creep-higher-wary-on-fed-and-boj-outlooks.html "Asia shares creep higher, wary on Fed and BOJ outlooks") and ECB,” Christensen added.

The Fed is widely expected to deliver a 25 basis-point rate hike – a shift down from its 50bp and 75bp [increases last year – while market watchers say](https://www.financedigest.com/should-we-be-more-cautious-about-contactless-1-in-4-young-adults-with-contactless-cards-say-theyve-increased-their-spending.html "Should we be more cautious about contactless? 1 in 4 young adults with contactless cards say they’ve increased their spending") the BoE and ECB are likely to raise rates by 50bps each.

The euro, which is headed for a near 1.7% monthly gain, has drawn [support from continued](https://www.financedigest.com/adnami-appoints-burnett-and-bukholt-to-support-continued-expansion.html "Adnami appoints Burnett and Bukholt to support continued expansion") hawkish rhetoric by ECB policymakers and ebbing fears of a deep recession in the euro zone.

Elsewhere, the yen fell 0.3% to 130.195 per [dollar after Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") of Japan governor Haruhiko Kuroda on Monday said the central bank must continue its easy policy.

The Australian [dollar fell 0.5% to $0.7071 but was on track for a monthly gain](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") of nearly 4%, after Australia’s inflation rate shot to a 33-year high last quarter, causing traders to ramp up bets that the Reserve Bank of Australia will have to tighten interest rates further.

With China returning from its Lunar New Year holiday, focus will be on the upcoming release of its [purchasing managers’](https://www.financedigest.com/marketmind-purchasing-managers-of-the-world-diverge.html "Marketmind: Purchasing managers of the world, diverge") index (PMI) data on Tuesday.

So far, the data coming from China, or the vibes coming from China, do play to the view that a good [reopening in terms of activity](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") is likely to unfold,” said Rodrigo Catril, a currency strategist at National Australia Bank.

The onshore yuan jumped against the dollar on Monday, rising roughly 0.5% to 6.7425, as [investors cheered](https://www.financedigest.com/despite-the-headwinds-investors-have-important-reasons-to-be-cheerful.html "DESPITE THE HEADWINDS, INVESTORS HAVE IMPORTANT REASONS TO BE CHEERFUL") signs of economic recovery indicated by robust holiday spending and tourism data.

(Reporting by Samuel Indyk and Susan Mathew in London and Rae Wee in Singapore; Editing by Bradley Perrett, Christopher Cushing and Hugh Lawson)


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