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Euro under pressure ahead of Jackson Hall
AI Summary
- Euro declined against the US dollar due to rise in US Treasury yields, with expectations of European interest rate cut in September decreasing
- Dollar index rose by 0.2% reflecting continued increase in US currency levels, supported by strong US economic data
- ECB likely to keep interest rates unchanged in September, with money market pricing stable below 30% for rate cut; investors await comments from ECB President Christine Lagarde at Jackson Hole Symposium
The euro declined in the European market on Tuesday against a basket of global currencies, to extend its losses for the second consecutive day against the US dollar, under negative pressure from the rise in US Treasury yields, which supports the rise of US currency levels in the foreign exchange market.
The likelihood of a European interest rate cut in September declined, due to the entrenched inflationary pressures currently facing monetary policymakers at the European Central Bank, and in order to reprice those expectations, investors later this week await comments from ECB President Christine Lagarde at the annual Jackson Hole Economic Symposium.
Price Overview
• Today’s euro exchange rate: The euro fell against the dollar by 0.2% to ($1.1639), from the opening price of ($1.1661), and recorded the highest level at ($1.1675).
• The euro ended Monday’s trading down by 0.35% against the dollar, marking its second daily loss in the last three days, due to the decline in expectations of a US interest rate cut.
US Dollar
The dollar index rose on Tuesday by 0.2%, maintaining its gains for the second consecutive session, reflecting the continued rise of the US currency levels against a basket of major and minor currencies.
This rise is supported by the current increase in the yield on 10-year US Treasury bonds, as strong data on producer prices and retail sales in the United States reduced the likelihood of a Federal Reserve interest rate cut in September.
In order to reprice those expectations, markets this week are awaiting comments from Federal Reserve Chairman Jerome Powell at the annual Jackson Hole Economic Symposium.
European Interest Rates
• The latest inflation data in the euro area showed the persistence of entrenched inflationary pressures on the European Central Bank’s monetary policymakers.
• According to some Reuters sources, a clear majority at the ECB’s latest meeting expressed a preference to keep interest rates unchanged in September, for the second consecutive meeting.
• The money market’s pricing of the likelihood that the European Central Bank will cut European interest rates by about 25 basis points in September is currently stable below 30%.
• And in order to reprice those expectations, investors are awaiting comments from European Central Bank President Christine Lagarde at the Jackson Hole Symposium.
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