The European Central Bank rules out reducing interest rates next October. Strong possibilities for reducing US interest rates by about 50 basis points
The euro jumped in the European market on Monday to its highest level in two weeks against the US dollar, resuming its gains that were temporarily halted on Friday, amid bullish expectations based on hopes of a narrowing of the interest rate gap between Europe and the United States.
The European Central Bank ruled out lowering interest rates next October after the large cut last week. On the other hand, the possibility of the Federal Reserve increasing US interest rates by about 50 basis points next week.
Price overview: The euro’s exchange rate today: The euro rose against the dollar by 0.4% to ($1.1119), the highest since September 6, from the opening trading price of ($1.1076), and recorded the lowest level at ($1.1074).
•The euro ended Friday’s trading down by less than 0.05% against the dollar, after achieving a 0.6% rise the previous day as part of the recovery process from the lowest level in four weeks at $1.1002.
•The euro lost more than 0.1% last week against the dollar, the second weekly loss in the last three weeks, as part of correction and profit-taking operations from the highest level in 13 months at $1.12.
European Central BankAfter the European Central Bank’s decision to lower interest rates last week, Reuters published an important report, citing some of its sources familiar with the matter, in which it reported that members of the European Central Bank now rule out the Monetary Policy Committee cutting interest rates again at the next meeting on October 17.
Reuters sources explained that monetary policy makers at the European Central Bank believe that cutting interest rates in October is unlikely, unless there is a significant slowdown in economic growth, indicating that there will most likely not be enough new information available by October 17 to justify another cut. At interest rates.
European Rates In the wake of the ECB meeting, money market pricing shows that investors see around 36 basis points of cuts coming over the remainder of 2024, suggesting that markets see good prospects for more than one cut.
But the risk is that the ECB’s consistent approach, which appears to favor a quarterly cut, may disappoint these expectations. Any lower repricing of interest rate cut expectations would be a fundamentally supportive development for the euro.
American Interest Reports in the Wall Street Journal and Financial Times last week stated that the Federal Reserve’s decision next week will be difficult.
Following these reports, and according to the “Feed Watch” tool of the “CME” group: the pricing of the possibilities of reducing US interest rates increased by about 50 basis points at the current September meeting from 14% to 45%, and the pricing of the possibilities of a cut decreased by about 25 basis points. From 86% to 55%.
Bullish expectations• Derek Halfpenny, head of research for global markets in Europe, the Middle East and Africa at MUFG Bank Limited, says: The EUR/USD pair has received an additional boost due to growing speculation that the Federal Open Market Committee may actually cut interest rates by 50 basis points this week. Next.
Halfpenny added: The euro could remain in a position to remain competitive with markets positioning themselves for higher risks from a strong start to the upcoming interest rate reduction cycle by the Federal Reserve.
•Some analysts expect the EUR/USD pair to continue rising, with a strong chance of crossing the $1.12 barrier if the Federal Reserve’s decisions are more pessimistic than currently expected.
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