The euro fell in European trading on Monday against a basket of global currencies, resuming its two-day recovery against the US dollar and approaching its lowest level in seven weeks, under negative pressure due to concerns about widening interest rate differentials between Europe and the United States.
Amid the current division over the likelihood of the European Central Bank raising interest rates at its next October meeting, markets are awaiting a new batch of important economic data from the Eurozone, looking for clearer signals on the path of monetary policy, and whether the bank will proceed with tightening it again during the remainder of this year.
Price overview
Euro exchange rate today: The euro fell against the dollar by more than 0.1% to ($1.1474), from today’s opening price of ($1.1485), and recorded a high of ($1.1486).
The euro ended Friday's trading session up 0.1% against the dollar, its second consecutive daily gain, as it recovered from a seven-week low of $1.1454.
The euro lost about 1.0% against the dollar last week, its second consecutive weekly loss and its biggest weekly loss since last June, due to the Federal Reserve's hawkish meeting.
US dollar
The dollar index rose more than 0.1% on Monday, resuming gains that had paused for two sessions as part of a correction and profit-taking from seven-week highs, reflecting a renewed rise in the US currency against a basket of major and minor currencies.
This rise comes amid increased buying activity of the US dollar as the best available investment in the foreign exchange market, especially after the more aggressive statements of a Federal Reserve official, which boosted the likelihood of another US interest rate hike before the end of this year.
Minneapolis Federal Reserve President Neel Kashkari said that inflation remains very high and that inflationary pressures have broadened to include wider sectors than just the oil price shock caused by the Iran war.
European interest rate
Sources at the European Central Bank: Further tightening of monetary policy is likely, and another interest rate hike could be discussed as early as October.
The money market's pricing of the likelihood of the European Central Bank raising European interest rates by about 25 basis points next October is currently stable below 50%.
In order to reprice those possibilities, investors are awaiting the release of more economic data in the Eurozone on growth, inflation, unemployment and wage levels.
Interest rate differentials
After the Federal Reserve raised US interest rates by about 25 basis points to a 4% range last week, the interest rate differential between Europe and the United States widened to 135 basis points in favor of the US interest rate, which enhances investment opportunities in the US dollar against the euro.
