The euro rose broadly in the European market on Thursday against a basket of global currencies, rebounding strongly from its lowest level in 17 months against the US dollar, with significant buying activity from low levels.
The euro's rise was supported by the decline of the US dollar, after the yield on ten-year US Treasury bonds fell to its lowest level in three weeks, influenced by less hawkish statements from some Federal Reserve officials, which contributed to reducing market bets on a Federal Reserve interest rate hike this October.
Price overview
Euro exchange rate today: The euro rose against the dollar by 0.75% to ($1.1241), compared to today’s opening price of ($1.1156), and recorded a low of ($1.1147).
The euro ended Wednesday's trading down 0.4% against the dollar, hitting a 17-month low of $1.1113, due to higher-than-expected inflation data in the United States.
US dollar
The dollar index fell 0.65% on Thursday, giving up its highest level in a year and a half at 102.95 points, reflecting a broad decline in the levels of the US currency against a basket of major and minor currencies.
Aside from the accelerated profit-taking, the US dollar is declining due to falling US yields, especially with the diminishing likelihood of the Federal Reserve raising interest rates in October.
The yield on 10-year US Treasury bonds fell by more than 2% today, deepening its losses for the third consecutive session and hitting a three-week low of 5.089%, on its way to falling below the 5% mark, which is putting significant pressure on the US dollar exchange rate.
Federal Reserve member Michelle Bowman said the central bank has enough time to wait and monitor developments in financial markets and the economy following the September interest rate hike before deciding on the need for any further action.
Mary Daly, president of the Federal Reserve Bank of San Francisco, said that we will likely need to raise interest rates, but not urgently. She indicated that the central bank can wait until the picture becomes clearer.
Following the above comments, according to the CME Group’s FedWatch tool, the pricing of the probability of the Federal Reserve keeping interest rates unchanged at its October meeting rose from 46% to 68%, and the pricing of the probability of raising interest rates fell by about 25 points from 54% to 32%.
European interest rate
European Central Bank President Christine Lagarde said the bank is closely monitoring the risk that rising energy prices, linked to geopolitical developments, could spill over into wages and prices of goods and services, potentially prolonging inflationary pressures.
Lagarde added that the bank is monitoring wage developments and workers' demands to detect any additional pressures that may affect the price trajectory, and stressed the bank's readiness to act if inflationary indicators emerge.
The money market's pricing of the likelihood of the European Central Bank raising European interest rates by about 25 basis points this October is stable at around 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.
Euro performance forecast
At FX News Today, we expect the euro to continue moving in positive territory as more buying enters from lower levels, and the single currency may surge to its highest level in at least two weeks, if more data and comments are released in the United States that reduce the likelihood of a US interest rate hike in October.
