Hopes grow that the interest rate gap between Europe and the United States will narrow
Markets await comments from central bankers in Jackson Hole
The euro rose in the European market on Monday against a basket of global currencies, extending its gains for the second day in a row against the US dollar, recording its highest level in 2024, specifically its highest level in eight months, amid bullish expectations based on increasing hopes of narrowing the interest rate gap between Europe and the United States.
Global interest rates are projected to see the European Central Bank cut rates by 25 basis points before the end of the year, while the Federal Reserve is projected to cut rates by 100 basis points.
Global markets are looking ahead to the Jackson Hole Economic Forum this week, where most of the world's central bankers are speaking, which is expected to provide further evidence of interest rate cuts this year.
Price overview• Today's euro exchange rate: The euro rose against the dollar by about 0.25% to ($1.1050), the highest since December 2023, from the opening price of trading at ($1.1025), and recorded its lowest level at ($1.1023).
The euro ended Friday's trading up 0.5%, its fourth gain in the past five days, thanks to a series of weak economic data in the United States.
The euro rose 1.05% last week against the dollar, its third straight weekly gain, on hopes of a narrowing interest rate gap between Europe and the United States.
European Interest Rates•Traders are almost fully pricing in the possibility of the European Central Bank cutting interest rates by another 25 basis points before the end of this year.
The market is waiting for more data that will show the development of growth and inflation levels in the Eurozone during the coming period.
The release of purchasing managers' indices for key sectors in Europe for August on Thursday, any sign of fading economic momentum in the euro zone, will enhance the chances of a further cut in European interest rates.
The market awaits comments from European Central Bank President Christine Lagarde at the Jackson Hole Economic Forum.
US Interest Rates•Traders are almost fully pricing in the possibility of the Federal Reserve cutting interest rates by about 100 basis points before the end of this year.
The market is awaiting the release of the minutes of the Federal Reserve's latest meeting, scheduled for Wednesday, as it is expected to include more evidence about possible cuts in US interest rates.
Federal Reserve Chairman Jerome Powell speaks at the Jackson Hole Forum on Friday. Interest Rate Gap The interest rate gap between Europe and the United States is currently 125 basis points in favor of U.S. rates. Given the current outlook for European and U.S. interest rates, the gap is expected to narrow to 50 basis points before the end of the year, which would favor a stronger euro-dollar exchange rate.
Euro performance forecast
Scotiabank analyst Sean Osborne said: The EUR/USD pair is close to surpassing the 1.1050 level, as the general trend remains bullish for the European currency, as the daily chart shows.
Osborne added: The daily chart shows that the euro has maintained a steady upward trend since June, and short-, medium- and long-term trend indicators remain bullish.
“EUR/USD has recently broken out of its symmetrical triangle, suggesting a potential upside towards 1.1140 and the July 2023 high of 1.1275,” Societe Generale strategists said in a Friday review of EUR/USD charts. “Last week’s low at 1.0880 has now become key support,” they added.
