The euro fell in the European market on Wednesday against a basket of global currencies, continuing its losses for the second day in a row against the US dollar, after the US currency received a new boost from rising US Treasury bond yields, ahead of an important speech by Federal Reserve Chairman Kevin Warsh.
In order to reprice expectations regarding the path of European interest rates, markets are awaiting a speech later today from European Central Bank President Christine Lagarde at the annual Sintra Forum in Portugal, along with the release of key Eurozone inflation data for June.
Price overview
The euro fell against the dollar by about 0.2% to a level of ($1.1402), compared to the opening price of the day at ($1.1421), while it recorded a high level at ($1.1423).
The euro ended Tuesday's trading down less than 0.1% against the dollar, its first loss in four days, due to a rise in the yield on 10-year US Treasury bonds.
US dollar
The dollar index rose 0.2% on Wednesday, maintaining its gains for the second consecutive session, reflecting the continued rise of the US currency against a basket of major and minor currencies.
The dollar received strong support from the recent rise in long-term US Treasury yields, especially after positive US labor market data boosted the likelihood that the Federal Reserve will raise interest rates at least once this year.
In order to reprice those possibilities, global financial markets are awaiting, later today, a speech by Federal Reserve Chairman Kevin Warsh at the European Central Bank Forum in Sintra, Portugal.
European interest rate
Reports indicate that the European Central Bank is considering suspending its monetary policy normalization process in July if energy prices remain at their current levels.
The financial markets are pricing in the likelihood of the European Central Bank raising interest rates by 25 basis points at its July meeting at around 30%.
Inflation in Europe
In order to reprice the likelihood of European interest rate hikes this year, investors are awaiting the release later today of key Eurozone inflation data for June, which will reveal the extent to which inflationary pressures continue to weigh on monetary policymakers at the European Central Bank.
The annual consumer price index for the Eurozone is due to be released at 09:00 GMT, with market expectations pointing to a slowdown in the inflation rate to 3.0% in June, compared to 3.2% in May. Core inflation is also expected to slow to 2.5%, compared to 2.6% in the previous month.
Christine Lagarde
At 13:00 GMT, the President of the European Central Bank, Christine Lagarde, will deliver an important speech at the European Central Bank Forum on Central Banking in Sintra, Portugal.
The speech is expected to include further clarifications regarding inflation developments in the Eurozone, and the European Central Bank's view of the future of interest rates during the current year.
Euro performance forecast
At FX News Today, we expect that if inflation data comes in lower than market expectations, coupled with less hawkish statements from Christine Lagarde, the likelihood of European interest rate hikes again this year will decrease, which could exacerbate the euro's losses against a basket of global currencies.
