The euro rose in the European market on Monday against a basket of global currencies, to consolidate above the lowest level in two weeks against the US dollar, in the process of achieving the first gain in the last four days, amid buying activity from corrective levels, and supporting trading above the psychological barrier at $ 1.1.
Consumer price data released at the end of last week showed that inflationary pressures on monetary policymakers at the European Central Bank receded, which led to a rise in the prospects of a European interest rate cut in September.
With full pricing for the possibility of a US interest rate cut also by about 25 basis points later this month, markets await the release of important data on the US labor market this week, especially new non-farm payrolls data in August.
Euro exchange rate today: The euro rose against the dollar by 0.25% to ($1.1070), from the opening price of trading at ($1.1045), and recorded the lowest level at ($1.1040), the lowest since August 19.
The euro ended Friday’s trading down 0.3% against the dollar, in the third consecutive daily loss, due to European inflation data.
Read also:Dollar hits two-week high against the euro
The euro achieved a rise of 2.0% against the dollar over the past August trading, in the second consecutive monthly gain, and the largest monthly gain in 2024, specifically since November 2023, based on hopes of narrowing the interest rate gap between Europe and the United States.Inflation in EuropeOfficial data released on Friday, showed a slowdown in inflation levels in Europe last August, reducing inflationary pressures on monetary policymakers at the European Central Bank.
The overall consumer price index rose by 2.2% annually in August, according to market expectations by a rise of 2.2%, and the index recorded a rise of 2.6% in July.
The core consumer price index rose 2.8% in August, according to market expectations, up 2.8%, and the index recorded a rise of 2.9% in July.
Following the above data, futures for the likelihood of the European Central Bank cutting interest rates rose by about 25 basis points in September from 60% to 80%.
Persistently weak data from the Eurozone supports the case for further cuts by the ECB.
According to CME Group’s FeedWatch: The pricing of the prospects of a 50 basis point cut in US interest rates at the September meeting is currently stable at 31%, and the pricing of the prospects of a cut by about 25 basis points at 69%.
In order to re-price these possibilities, investors are awaiting the release of many important data on the labor market in the United States, especially the release of new non-farm payrolls data on Friday.The interest rate gap between Europe and the United States is currently at 125 basis points in favor of US interest rates.In light of the current prospects around European and US interest rates, it is expected that this gap will continue unchanged during September, but it may It shrinks to 100 basis points if the Federal Reserve cuts interest rates by about 50 basis points.
Therefore, if the US labor market data is worse than market expectations, the odds of a US interest rate cut will rise by about 50 basis points, which will support the rise in the euro exchange rate against the dollar.
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