The euro declined in the European market..and is about to record the largest monthly losses in a year

The euro fell in the European market on Wednesday against a basket of global currencies, to resume its losses that were paused yesterday against the US dollar, recording a new low in two months, about to incur the largest monthly loss in a year.

Today’s decline comes after the European Central Bank’s financial stability report, which renewed concerns about the safety of the banking sector in Europe, and reduced the possibility of large increases in European interest rates during the coming period.

And the US currency jumped to a new record level in two months, as the escalating pricing of the possibility that the Federal Reserve will raise US interest rates at a pace of 25 basis points for the fourth time in a row during next June.

Euro exchange rate today

The euro fell against the dollar by more than 0.6% to $1.0666, the lowest since last March 20, from the opening price of trading at $1.0734, and recorded the highest level today at $1.0735.

On Tuesday, the euro achieved an increase of 0.25% against the dollar, in the first gain in the last six days, as part of breath-taking operations, benefiting from the improvement in risk appetite in global markets.

monthly transactions

Over the course of May’s dealings, which officially end at today’s settlement, the single European currency, the euro, is down so far by 3.2% against the US currency, the dollar, about to incur its first monthly loss in the last three months, and with the largest monthly loss since April 2022. ..

This largest monthly loss in a year is due to escalating concerns about the widening interest rate gap between Europe and the United States, which is currently stable at 150 basis points, and this gap may continue at the same pace next month, if the European Central Bank raises European interest rates. At a pace of 25 basis points, as well as the Federal Reserve during the June meetings

The gap may widen to 200 basis points if the European Central Bank decides to keep current interest rates unchanged, while the Federal Reserve decided to raise US interest rates by 25 basis points while keeping interest rates high for as long as possible.

Financial stability report

In its latest report on financial stability, the European Central Bank said on Wednesday that European banks may need to allocate more funds to cover losses, added that there are gaps in the financial system due to high interest rates, and noted that commercial real estate markets are still in a weak state. recession.

European comments

The Governor of the Bank of Spain and a member of the European Central Bank, Pablo Hernandez de Cos, said on Monday that the European Central Bank is close to ending the cycle of tightening monetary policy.

Bank of Estonia Governor and European Central Bank member Madis Mueller said on Wednesday that it is very likely that the central bank will raise interest rates by about 25 basis points next month.

These comments increased doubts about the existence of additional increases in European interest rates during the next June and July meetings.

Traders are now reducing bets about the existence of further increases in European interest rates at a rate of 50 basis points during this year, and the focus has become lost on raising the rate at a rate of 25 basis points. ‏

European interest

The European Central Bank is one of the slowest major central banks in facing inflationary pressures, as European interest rates rank sixth in the list of interest rates of central banks for the eight major currencies in the global exchange market.

In order to obtain more evidence about the future of European interest rates, investors are awaiting tomorrow, Thursday, the release of the main inflation data in Europe during May, which shows the level of inflationary pressures on monetary policy makers at the European Central Bank.

U.S. dollar

On Wednesday, the dollar index jumped by 0.5%, to resume its gains, which were paused in the previous session, recording a new record high in two months at 104.57 points, reflecting the continuation of the broad rise in the levels of the US currency against a basket of major and minor currencies.

This rise comes in light of the acceleration of currency purchases as the best available investment, especially in light of the escalating pricing in the possibility of the Federal Reserve raising US interest rates at a rate of 25 basis points during next June.

American interest

With a series of tough comments from Federal Reserve officials and strong economic data in the United States, futures pricing for the odds of a 25 basis point hike in US interest rates at the June 14 meeting this week has increased from 62% to 65% at present. And the pricing of futures contracts for the possibility of maintaining interest rates decreased from 38% to 35% currently.