The euro rose in the European market on Tuesday against a basket of global currencies, extending gains for the third consecutive day against the US dollar, recording the highest level in seven weeks, as selling of the US currency continues in the foreign exchange market, overshadowing concerns about political stability in France, the second-largest economy in the eurozone.
Tomorrow, Wednesday, the European Central Bank begins its important monetary policy meeting, where interest rates are expected to remain unchanged for the second meeting in a row. Markets await further signals on the possibility of resuming the monetary easing cycle during the remainder of this year.
Price Overview
• Exchange rate of the euro today: The euro rose against the US dollar by 0.15% to (1.1778$), the highest since July 24, from today’s opening price at (1.1763$), recording the lowest level at (1.1758$).
• The euro ended Monday’s trading up by 0.4% against the dollar, marking its second daily gain in a row, after weak US employment data boosted expectations of a US interest rate cut.
US Dollar
The dollar index fell on Tuesday by more than 0.1%, deepening losses for the third consecutive session, recording the lowest level in seven weeks at 97.32 points, reflecting the continued decline of the US currency against a basket of major and minor counterparts.
This decline comes amid ongoing selling of the US dollar, especially after recent US data showed further deterioration in the labor market, reinforcing expectations that the Federal Reserve will deliver deeper interest rate cuts.
According to the CME FedWatch tool, traders are pricing in an 89% chance of a 25-basis-point rate cut at the Federal Reserve’s September meeting, and an 11% chance of a larger 50-basis-point cut.
Fall of François Bayrou
French Prime Minister François Bayrou fell after losing a crucial confidence vote in parliament, with 364 lawmakers voting against the government compared to 194 in favor. This political collapse dealt a major blow to the authority of President Emmanuel Macron.
Recently, internal discontent escalated over Bayrou’s proposed austerity plans, which included cutting public budgets and canceling two public holidays in an attempt to address the country’s heavy debt, amounting to about 114% of GDP.
In light of this, President Macron is expected to appoint a new prime minister in the coming days, but he will face a serious challenge in securing stable parliamentary support, according to reports and analyses pointing to fears of prolonged legislative paralysis.
European Central Bank
• The European Central Bank meets on Wednesday and Thursday to study the appropriate monetary policy for the latest economic developments in the euro area.
• The bank is widely expected to keep European interest rates unchanged at the 2.15% range, the lowest level since October 2022, for the second meeting in a row.
• Markets are awaiting further evidence on the timing of the European Central Bank’s resumption of monetary easing and interest rate cuts before the end of this year.
