The US dollar continues to recover from low levels
The likelihood of a European interest rate cut in February 2026 is low.
The euro fell in the European market on Monday against a basket of global currencies, continuing its losses for the third consecutive day against the US dollar, moving away from its highest level in three months, as correction and profit-taking continued, coinciding with the recovery of the US currency levels before the end of trading in 2025.
The worsening losses of the single currency are curbed by the declining likelihood of the European Central Bank cutting interest rates in February 2026, especially given the recent improvement in economic activity in the Eurozone, along with expectations that this improvement will continue as downside risks recede.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.15% to ($1.1754), from today’s opening price of ($1.1771), and recorded a high of ($1.1786).
The euro ended Friday's trading down about 0.1% against the dollar, its second consecutive daily loss, as profit-taking and corrections continued from a three-month high of $1.1808.
The euro gained 0.55% against the dollar last week, its fourth weekly gain in the last five weeks, thanks to the narrowing interest rate gap between Europe and the United States.
US dollar
The dollar index rose 0.1% on Monday, extending its gains for the third consecutive session and continuing its recovery from two-and-a-half-month lows, reflecting the continued rebound of the US currency against a basket of major and minor currencies.
Apart from purchases from low levels, the recovery of the US dollar levels before the end of this year’s trading comes with activity to settle short positions, as the US currency approaches recording its biggest annual loss since 2017.
European interest rate
The money market pricing for the likelihood of the European Central Bank cutting European interest rates by about 25 basis points in February 2026 is currently stable at less than 10%.
In order to reprice the above probabilities, investors are awaiting further economic data from the Eurozone on inflation, unemployment and wage levels.
Interest rate gap
Following the Federal Reserve’s recent decision, the interest rate gap between Europe and the United States has narrowed to 160 basis points in favor of the US interest rate, the lowest gap since May 2022, which is in favor of a higher exchange rate for the euro against the US dollar.
