The euro fell in the European market on Wednesday against a basket of global currencies, resuming its losses that had paused temporarily the previous day against the US dollar, moving away again from its highest levels in three months, despite a Reuters report that the European Central Bank is preparing to raise interest rates next September.
The European Central Bank raised borrowing costs for the first time in nearly three years last June to prevent war-induced energy price spikes from spreading widely across the Eurozone economy.
Price overview
Euro exchange rate today: The euro fell against the dollar by more than 0.1% to ($1.1660), from today’s opening price of ($1.1674), and recorded a high of ($1.1677).
The euro ended Tuesday's trading session up 0.1% against the dollar, its first gain in three days, as profit-taking and corrective moves stalled from a three-month high of $1.1712.
The US dollar index rose 0.1% on Wednesday, resuming gains that had paused in the previous session, reflecting a recovery in the US currency against a basket of major and minor currencies.
This rise comes as long-term US Treasury yields rebound ahead of important US data releases that will provide further crucial clues about the likelihood of the Federal Reserve raising interest rates this year.
The personal consumption expenditures report for July is due later on Wednesday, along with data on US economic growth during the second quarter of this year.
European Central Bank: Three sources told Reuters that European Central Bank policymakers are prepared to raise interest rates at their next meeting in September to contain the fallout from the Iran war, but they do not want to signal further monetary tightening after that.
The sources, who spoke on condition of anonymity due to the sensitive nature of the matter, explained that with inflation nearing 3%, the ongoing Iranian conflict, and the Eurozone economy showing signs of resilience, European Central Bank governors believe the time has come to raise the main interest rate again, from 2.25% to 2.50%.
The sources added that the interest rate hike, which was included in the European Central Bank's economic forecast assumptions last June, likely indicates the central bank's determination to avoid a repeat of the sharp inflation wave that followed Russia's invasion of Ukraine in 2022.
The sources said they would get a clearer picture when inflation data for August is released next week, followed by updated economic forecasts from European Central Bank staff, which will be presented at the September 9-10 meeting.
European interest rate
Following the above report, the money market pricing of the probability of the European Central Bank raising European interest rates by about 25 basis points in September rose from 50% to 75%.
In order to reprice those possibilities, investors are awaiting the release of more economic data in the Eurozone on inflation, unemployment and wage levels.
Euro performance forecast
Here at FX News Today, we expect the euro to continue moving in negative territory against the US dollar, as purchases of the US currency as a safe haven increase due to concerns about renewed military tensions in the Middle East.
