• Hopes increase of a reduced eurozone-US rate gap
• Markets await central bank governors’ speeches in Jackson Hall

Euro rose in European trade on Monday, extending gains for the second session against the dollar and hitting 2024 highs amid a positive outlook and hopes for a reduction in the eurozone-US interest rate gap. 

Markets are betting the European Central Bank will cut interest rates by 25 basis points by the end of the year, while the Federal Reserve is estimated to cut rates by nearly 100 basis points. 

Now markets await the events of the Jackson Hall conference, where many global central bank governors convene and discuss monetary policies.

The Price 

The EUR/USD pair rose 0.25% today to $1.1050, the highest since December 2023, with a session-low at $1.1023. 

The pair rose 0.5% on Friday, the fourth profit in five sessions following a spate of weak US data.

Euro rallied 1.05% last week against the dollar, the third weekly profit in a row. 

European Rates

Markets are fully pricing in a 0.25% rate cut by the ECB this year.

Traders now wait for important eurozone data, including growth, inflation, and manufacturing data to gauge the likely path ahead for the eurozone monetary policy. 

US Rates

Markets have also completely priced in rate cuts worth 100 basis points by the Federal Reserve this year.

Traders are waiting for the Fed’s latest meeting minutes, scheduled for release on Wednesday, to get more clues. 

Rate Gap

The current eurozone-US interest rate gap stands at 125 basis points in favor of the US, and will likely shrink to 50 basis points by the end of the year, which would boost the euro. 

Societe General’s strategists expect the EUR/USD pair to head towards $1.1140, and then target July 2023 highs at $1.1275 as technical indicators point to a bullish wave. 

• Hedge funds buy up the yen
• Markets await Jerome Powell’s remarks in Jackson Hall 

The yen rose in Asian trade on Monday against a basket of major rivals, moving in a positive zone for the second day against the US dollar on bets the yen will gain further ground in the future. 

The dollar continued to decline in the forex market as the Federal Reserve is likely to cut interest rates starting next September, with traders now awaiting Jerome Powell’s speech later this week at Jackson Hall to gather more clues.

The Price 

The USD/JPY pair fell 0.8% today to 146.37 yen, with a session-high at 148.05.

The yen closed Friday up 1.2% against the dollar, recovering from two-week lows at 149.49.

Last week, the yen lost 0.65% against the dollar, the second weekly loss in a row after bearish remarks from the Bank of Japan reduced the odds of additional Japanese rate hikes this year. 

Upswing Bets

According to a major index, the yen carry trades have been unwound completely, with hedge funds and traders now reversing their long-term position on yen and moving to net buying for the first time since March 2021.

It took many weeks to reach that status, with catalysts such as Japanese rate hikes, government intervention, increasing haven demand. 

Rabo Bank’s analysts said the yen was the best performing G8 currency in July, with a 7% surge, before dragging its feet down again in August.

The Dollar

The dollar index fell 0.2% on Monday, extending losses for the second session and marking two-week lows at 102.19 against a basket of major rivals. 

The upcoming Fed Chair Jerome Powerll’s speech in Jackson Hall, in addition to the Fed’s meeting minutes, will be major movers of the markets this week. 

US stock indices rose on Friday and maintained gains amid optimism about the US economy and its ability to avoid a recession this year. 

Investors’ concerns about inflation and recession in the US receded following a spate of positive data.

Analysts now fully expect a Fed rate cut in September, however most experts believe it’ll be a 0.25% rate cut rather than a 0.5% cut. 

Recent Michigan University data about US consumer inflation expectations showed no changes at 2.9% next year, and 3% in the long term.

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in September stand at 74.5%, and at 25.5% for a 0.5% rate cut.

At the close, Dow Jones was up 0.2%, or 96 points at 40659, while marking a weekly profit of 2.9%.

S&P 500 rose 0.2%, or 11 points to 5554, with a weekly profit of 3.9%. 

NASDAQ added 0.2%, or 37 points to 17,631, with a weekly profit of 5.3%. 

Most cryptocurrencies rose on Friday as the risk appetite rebounded amid optimism that the US economy will avoid a recession this year.

Investors’ concerns about inflation and recession in the US recedes following a spate of positive data.

Analysts now fully expect a Fed rate cut in September, however most experts believe it’ll be a 0.25% rate cut rather than a 0.5% cut. 

Recent Michigan University data about US consumer inflation expectations showed no changes at 2.9% next year, and 3% in the long term.

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in September stand at 74.5%, and at 25.5% for a 0.5% rate cut.

On trading, ethereum rose 3.6% on Coinmarketcap as of 20:46 GMT to $2624, while marking a weekly profit of 1.3%.