© Reuters. The euro is near a 4-month high amid quiet trading
FXNEWSTODAY – The euro rose during trading on Tuesday against a basket of global currencies, maintaining its gains for the third day in a row against the US dollar, on the verge of touching the highest level in four months, amid quiet trading that dominates global financial markets due to the New Year’s holidays.
Last week, the single currency achieved the second consecutive weekly gain against the US currency, in light of growing hopes for reducing the current gap in prices between Europe and the United States.
Euro exchange rate today
It rose by 0.1% to $1.1028, from the opening price of $1.1015, and recorded today’s lowest level at $1.1013.
On Friday, the euro achieved an increase of less than 0.1% against the dollar, in the second daily gain in a row, and recorded the highest level in four months at $1.1040, after lower-than-expected data on personal consumption expenditures in the United States during November.
These data, along with less aggressive comments from Federal Reserve officials, strongly strengthened the possibility of cutting US interest rates by about 25 basis points during next March.
In terms of last week’s transactions, the euro achieved an increase of 1.1% against the dollar, the second weekly gain in a row, thanks to purchases of the euro as a better investment opportunity than the dollar in the medium term.
Interest rate gap
The interest rate gap between Europe and the United States is currently at 100 basis points, the smallest gap since May 2022, and is expected to narrow below that starting in March 2024, the likely timing of the first US interest rate cut.
The European Central Bank’s stance, which was more stringent than what was expected in the markets, reduced the possibility of cutting European interest rates early next year, specifically during the first half of 2024.
On the other hand, the Federal Reserve announced the end of the current cycle of raising US interest rates in the United States, and indicated the start of discussions to lower interest rates during the year 2024.
Expectations that the euro will rise to $1.11 before the end of 2023
According to the latest forecasts issued by one of the largest banks in Scandinavia, Danske Bank, the euro/dollar exchange rate could rise to 1.11 before the beginning of 2024 and begin to decline for several months.
This call is consistent with the fact that global financial markets are experiencing a period of improving sentiment that tends to benefit the EUR/USD pair, thanks to growing confidence that global inflation will fall further and allow central banks to cut interest rates over the coming months.
2023-12-26 10:59:00
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