The US dollar fell against the euro on Monday as Christine Lagarde, the president of the European Central Bank, discussed the possibility of a rate hike in the eurozone.
The euro exchange rate in dollars was at its strongest level since April 26. The two currencies were close to each other for the first time in 20 years.
According to the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter.
The deposit rate was -0.5%. Banks are charged a fee to hold their reserves at central banks. The action is meant to encourage banks to lend and consumers to spend their money at ultra-low rates. In June of last year, the euro area's economy was helped by the introduction of negative interest rates by the euro area's central bank.
The broader US Dollar Index fell 1% on Monday due to the dollar's drop against the euro. The index recently hit a 20-year high due to the Federal Reserve's view on interest rates.
The central bank should begin to normalize monetary policy because the inflation outlook has shifted upwards compared to the period before the COVID-19 outbreak, Lagarde said.
The euro area's inflation was set to hit 7.5% in April, the highest rate on record, due to a surge in energy costs.
Net purchases under the asset purchase program are expected to end early in the third quarter. Lagarde wrote that the rate lift-off would be in line with the forward guidance.
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