The euro fell in the European market on Monday against a basket of global currencies, giving up its highest level in 13 months against the US dollar recorded earlier in Asian trading, due to the relative activity in correction operations and profit taking.
The single European currency, the euro, crossed the $1.12 barrier in a few moments for the first time this year, specifically since July 2023, thanks to growing hopes of narrowing the interest rate gap between Europe and the United States.
The current global interest rate outlook suggests that the European Central Bank will cut interest rates by about 25 basis points before the end of the year, while the Federal Reserve will cut interest rates by about 100 basis points.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.1% to ($1.1175), from the opening price of trading at ($1.1187), and recorded its highest level at ($1.1202), the highest since July 2023.
The euro ended Friday's trading up 0.7% against the dollar, after less aggressive comments from Federal Reserve Chairman Jerome Powell in Jackson Hole.
The euro achieved a 1.5% rise last week against the dollar, in the fourth weekly gain in a row, and the largest gain in 2024, specifically since November 2023, thanks to the activity of buying the euro as a better investment than the US dollar.
European interest
Final consumer price data for July released last week confirmed that inflation in Europe was accelerating again, pointing to renewed inflationary pressures on policymakers at the European Central Bank.
Traders are almost fully pricing in the possibility of the European Central Bank cutting interest rates by another 25 basis points before the end of this year.
Investors will be awaiting key inflation data for major European countries and across Europe this week, to re-price the current probabilities around European interest rates.
US interest
“It’s time to adjust monetary policy,” Federal Reserve Chairman Jerome Powell said at the Jackson Hole Economic Forum on Friday.
Powell added: My confidence has increased that inflation is on a sustainable path back to the 2% target.
Traders are almost fully pricing in the possibility of the Federal Reserve cutting interest rates by about 100 basis points before the end of this year. Interest Rate Gap The interest rate gap between Europe and the United States is currently 125 basis points in favor of US rates. Given the current odds on European and US interest rates, the gap is expected to narrow to 50 basis points before the end of the year, which is in favor of a stronger euro-dollar exchange rate.
Euro performance forecast
“The momentum in EUR/USD is showing signs of fatigue, with the $1.12 barrier struggling to be breached for the first time since July 2023,” said Ruta Preskennett, chief FX strategist at Convera.
“The aggressive bets on interest rate cuts launched by the United States recently have overshadowed the economic weakness in the eurozone,” Preskinet added.
