Euro resumes gains on European interest rate prospects

Euro rose in European trade today, resuming the gains against dollar after a two-day hiatus on profit-taking from five-month highs back then, with current gains coming amid estimates of a 0.75% rate hike by the ECB next month.

The greenback fell amid improving risk appetite in the market while demand on safe havens slow down, with investors expecting China to control the ongoing protest in China quickly. 

EUR/USD rose over 0.5% to 1.0394, after falling 0.55% yesterday, the second loss in a row on profit-taking, after hitting five-month highs earlier at 1.0496. 

European Rates 

Now markets almost fully expect the ECB to increase interest rates by 75 basis points in December instead of 50 basis points, following bullish remarks by ECB President Christine Lagarde. 

Investors await important European inflation data tomorrow for November to gauge final chances for a 0.75% rate hike by the ECB. 

The Dollar

The dollar index fell 0.5% on Tuesday, resuming losses after a two-day advance from three-month lows back then at 105.22 against a basket of major rivals. 

The greenback recouped recently following some bullish remarks by a few Fed officials that showed the Fed might still be aggressive in its policy tightening efforts. 

Fed Saint Louis President James Bullard said the ECB needs to raise interest rates by a bit more, while New York Fed President John Williams said the Fed needs to carry on its path of rate hikes.

The dollar fell today as risk appetite improved in the markets, while Asian stocks advanced, led by Chinese stocks, hurting demand on safe haven.

Investors now mostly expect Chinese authorities to control ongoing protests and alleviate some of the strict Covid 19 restrictions.