Exchange market awaiting inflation data in the United States
The euro rose in the European market on Monday against a basket of global currencies, to move in positive territory for the first time in the last five days against the US dollar, this rise comes amid bullish expectations, as the single currency aims to exceed the $1.1 barrier, based on hopes of narrowing the interest rate gap between Europe and the United States.
After hot inflation data in Europe reduced the likelihood of the European Central Bank cutting interest rates by about 25 basis points in September, the foreign exchange market this week awaits the release of key inflation data in the United States to reassess the existing prospects of a US interest rate cut next month.Price outlook • Euro exchange rate today: The euro rose against the dollar by about 0.15% to ($1.0928), from the opening price of trading at ($1.0915), and recorded a low of ($1.0910).
• The euro ended Friday’s trading less than 0.1% against the dollar, in the fourth consecutive daily loss, as corrections and profit-taking continued from a seven-month high of $1.1008.
The euro gained 0.1% last week against the dollar, the second consecutive weekly gain, on hopes of a narrowing interest rate gap between Europe and the United States.
Recent consumer price figures in Europe came in higher than market expectations in July, in the latest data indicative of entrenched inflationary pressures on the European Central Bank.
That data, coupled with aggressive comments from some monetary policymakers at the European Central Bank, has reduced the existence of additional cuts in European interest rates this year.
European interest ratePricing the possibilities of the European Central Bank cutting interest rates at the next September meeting below 50%, waiting for more data that shows the evolution of growth and inflation levels in the euro area during the coming period.
American interes
According to CME’s FeedWatch: pricing the prospects of a 50 basis point cut in US interest rates at the September meeting is currently stable at 46%, and the pricing of the prospects of a cut by 25 basis points at 54%.
In order to reprice the above contracts, investors await this week the release of producer and consumer price data for July, which are the main indicators for measuring inflation in the United States.
Interest rate gap
The interest rate gap between Europe and the US is currently at 125 basis points in favor of US interest rates.With the current prospects around European and US interest rates, the gap is expected to narrow to 100 basis points in September or to 75 basis points if inflation data comes in cooler than expected in July.
Expectations about the performance of the euro • We expect here at the site ‘FX News Today’: The euro will continue to move in positive territory against the US dollar, with strong prospects of exceeding the $1.1 barrier and recording new highs in several months, especially if US inflation data comes in weaker than expectations in July.
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