As the European Central Bank (ECB) started its policy meeting on Wednesday, the euro strengthened versus a basket of major currencies, continuing its upward trend against the dollar and getting close to three-month highs.
As the first step in monetary easing in Europe, the ECB is scheduled to drop interest rates for the first time since 2014. However, the pace of the reduction may be slower than anticipated.
Pressure on European policymakers increased as inflation surged again in May, and the likelihood of several more rate cuts this year decreased.
On the other hand, following a run of dismal US statistics, the likelihood of at least two Federal Reserve interest rate cuts this year increased.
The Price
After hitting a session low of $1.0872, the EUR/USD pair increased by 0.1% today to $1.0886.
Tuesday's closing euro/dollar loss was 0.25%, the first in four days as profit-taking pulled the currency down from its three-month high of $1.0916.
The European Central Bank
The European Central Bank is likely to lower interest rates by 25 basis points when it begins its monthly policy meeting later today.
Given the recent inflation figures, the European Central Bank (ECB) is expected to offer new insights on future monetary policy and interest rate paths.
US Exchange Rates
According to recent data, US manufacturing declined once more in May, and construction spending unexpectedly decreased as well, suggesting a slowdown in US development.
According to the Fedwatch tool, the likelihood of a September interest rate cut increased to 65% in September and to 78% in November as a result of the data.
Rate Difference
This week, the US/eurozone interest rate differential is predicted to widen to 125 basis points in favour of the US from its present level of 100 basis points, the lowest since May 2022.
