The euro rose in the European market on Thursday against a basket of global currencies, extending its gains for the sixth day in a row against the US dollar, recording a new record in 16 months, thanks to the growing hopes about the shrinking of the currently narrow gap in interest rates between Europe and the United States.
The US currency continues its sharp losses, due to the main inflation data in the United States, which recorded the lowest level in nearly two and a half years, to come very close to the Federal Reserve’s target at 2%, which strongly reinforced speculation about the imminent end of the cycle of raising interest rates.
Euro exchange rate today
The euro rose against the dollar by 0.2%, to $ 1.1149, the highest in March 2022, from the opening price of trading at $ 1.1127, and it recorded the lowest level today at $ 1.1127.
On Wednesday, the euro rose 1.1% against the dollar, its fifth daily gain in a row, and the largest daily gain since June 15, following lower-than-expected data on consumer prices in the United States.
interest rate gap
After the US inflation data, expectations have become more likely that the European Central Bank will implement additional increases in European interest rates, more than the increases currently expected from the Federal Reserve.
The European Central Bank is expected to raise interest rates at a pace of 25 basis points in the July and September meetings, and in contrast, the markets are very likely to raise interest rates by the Federal Reserve by about 25 basis points later this month. The cycle of raising US interest rates
The interest rate gap between Europe and the United States is currently at only 125 points, the lowest gap since May 2022, and is expected to decrease to only 100 basis points during next September.
US dollar
The dollar index fell on Thursday by 0.2%, deepening its losses for the sixth session in a row, recording the lowest level in 15 months at 100.42 points, reflecting the continued decline in the US currency levels against a basket of major and minor currencies.
In response to the Fed's hawkish path, the annual headline inflation rate in the United States declined last month for the twelfth month in a row, hitting its lowest level in nearly two and a half years, and the annual core inflation rate fell for the third month in a row.
The overall consumer price index rose by 3.0% annually in June, the lowest reading since March 2021, less than market expectations for a rise of 3.1%, much lower than the previous reading of 4.0%.
Core CPI rose by 4.8% yoy in June, below expectations for a 5.0% rise, and worse than the previous reading of 5.3%.
This data strongly reinforced the imminent end of the current interest rate hike cycle of the Federal Reserve, with the likely increase in the current July 25-26 meeting being the last.
Interest rate futures showed that markets have priced in a Fed rate hike in full later this month, but expectations for any further hikes have moderated broadly.
