Euro nears $1.100 barrier again
Hopes of lower interest rates grow between Europe and the United States
The euro rose in the European market on Thursday against a basket of global currencies, resuming its gains that stopped for two days. The US dollar is about to touch its highest level in seven months and trade above the $1.1 barrier again, thanks to increasing hopes of narrowing the interest rate gap between Europe and the United States next September.
Hot inflation data in Europe reduced the chances of the European Central Bank cutting interest rates in September, while weak labor market data in the United States increased the chances of the Federal Reserve cutting interest rates by about 50 basis points in September.
Price overview
Euro exchange rate today: The euro rose against the dollar by more than 0.2% to ($1.0945), from the opening price of trading at ($1.0921), and recorded its lowest level at ($1.0918).
The euro ended Wednesday's trading down 0.1% against the dollar, its second straight daily loss, as it corrected and profit-taking took place from a seven-month high of $1.1008. Inflation in Europe Consumer price figures released last week in Europe came in above market expectations in July, the latest data to point to persistent inflationary pressures on the European Central Bank.
That data, coupled with aggressive comments from some European Central Bank policymakers, dampened speculation of further European interest rate cuts this year.
European interest
The probability of the European Central Bank cutting interest rates at its September meeting is priced at less than 50%, pending further data that will clarify the development of growth and inflation levels in the Eurozone over the coming period.
US interest
Following the jobs report released in Washington on Friday, which included gloomy data on the state of the US labor market, showing the recession accelerating in the United States, the chances of the Federal Reserve cutting interest rates by about 50 basis points next September rose from 10% to 70%.
Interest Rate Gap The interest rate gap between Europe and the United States is currently 125 basis points in favor of US interest rates. Given the current probabilities regarding European and US interest rates, the gap is expected to narrow to 75 basis points in September, which enhances investment opportunities in the euro.
Euro performance forecast
•We expect here at FX News Today: The euro will rise above the $1.1 level again, in light of the clear activity in buying the European currency as one of the best investment opportunities available.
