Euro Slips on ECB Exit Report as Dollar Firms Ahead of Fed Minutes
The euro weakened on Wednesday following reports that European Central Bank (ECB) President Christine Lagarde may leave her post before the end of her term. At the same time, the U.S. dollar edged higher ahead of the release of the Federal Reserve’s January meeting minutes.
The Financial Times reported that Lagarde could step down before her term expires in October 2027. However, the ECB stated that no final decision has been made.
Currency markets reacted cautiously. Analysts noted that a potential leadership change at the ECB could trigger short-term volatility in bond yields and foreign exchange markets. Still, broader macroeconomic conditions and political developments are expected to remain the main drivers of monetary policy expectations.
The euro fell 0.2% to $1.1836 and declined by the same margin against the British pound, trading at 87.2 pence.
Lagarde has led the ECB since 2019 and oversaw aggressive interest rate hikes in 2022 and 2023 to combat inflation. With inflation now closer to the ECB’s target and rates expected to stay steady through 2026, her possible departure comes during a relatively stable policy period.
Fed Minutes and Geopolitics in Focus
With Asian markets largely closed for Lunar New Year holidays and limited European data releases, investors turned their attention to the Federal Reserve minutes and upcoming U.S. economic indicators.
The Fed held interest rates steady at its January meeting after cutting rates in the three previous sessions. The minutes are expected to reinforce the central bank’s cautious stance and its data-dependent approach to future rate decisions.
The U.S. dollar index rose 0.1% to 97.24, extending its gains to a third straight session.
Geopolitical developments also influenced markets. Iran and the United States reached an understanding on key “guiding principles” during indirect nuclear talks. However, Iranian officials indicated that a final agreement is not imminent.
In Geneva, U.S.-mediated peace talks between Ukraine and Russia concluded their first round. U.S. President Donald Trump has urged faster progress to end the four-year conflict.
Yen Softens as Japan Funds U.S. Projects
The Japanese yen slipped 0.3% to 153.65 per dollar after posting nearly 3% gains last week, its strongest weekly performance in almost 15 months.
The U.S. administration announced three infrastructure projects worth $36 billion to be financed by Japan. These projects are part of a broader $550 billion investment commitment aimed at reducing U.S. tariffs.
Analysts said increased Japanese direct investment into the United States could offer support to the dollar-yen exchange rate.
Kiwi Dollar Drops After RBNZ Holds Rates
The New Zealand dollar fell 0.7% to $0.6006 after the Reserve Bank of New Zealand (RBNZ) kept its key interest rate unchanged at 2.25%. Policymakers emphasized that monetary policy must remain accommodative to support economic recovery.
The Australian dollar declined 0.2% to $0.7072. Meanwhile, the British pound held steady at $1.3574 following mixed UK inflation data that showed easing headline inflation but persistent services price pressures.
