© Reuters Euro near peak two weeks ahead of Fed minutes
FXNEWSTODAY – The euro rose slightly in the European market on Wednesday against the US, maintaining its gains for the second day in a row, on the verge of touching the highest level in two weeks recorded yesterday, Tuesday, thanks to receding fears of widening interest rate differences between Europe and the United States.
Less aggressive comments from Federal Reserve officials have reduced the chances of an increase in US rates before the end of this year, keeping spreads steady at least until the first quarter of next year.
Euro exchange rate today
It rose approximately 0.1% to $1.0614, from the opening trading price of $1.0605, and recorded today’s lowest level at $1.0599.
On Tuesday, the euro rose 0.4% against the dollar, the fourth gain in the last five days, and hit a two-week high of $1.0620.
Interest rate differences
Interest rate differentials between Europe and the United States are currently at only 100 points, the lowest since May 2022, and are expected to remain so until the end of this year, and at least until the first quarter of next year.
This is in light of the current strong possibilities that the European Central Bank will stop raising rates during the current October meeting, especially after it announced during the September meeting that it had reached a restrictive interest rate.
After less aggressive comments from US monetary policy makers, the possibility of another increase in US interest rates by about 25 basis points before the end of this year.
Federal comments
Dallas Fed President Lori Logan said Monday: If long-term U.S. bond yields remain high, there may be less need to raise the federal funds rate.
Federal Reserve Vice Chairman Philip Jefferson said the US central bank would need to “act cautiously” in light of the recent rise in yields.
Atlanta Federal Reserve Bank President Rafael Bostic said on Tuesday that policy was restrained enough to bring inflation down to the 2% target.
“Rising yields may mean the Fed has to move less,” Minneapolis Fed President Neel Kashkari said.
San Francisco Federal Reserve Bank President Mary Daly said: Tightening financial conditions will mean that the central bank does not have to do as much.
American interest
Following the above comments, futures pricing on the potential for a 25 basis point US interest rate hike at the November 1 meeting declined from 22% to 15%, and a December 13 rate hike from 36% to 29%.
Federal Reserve Minutes
The re-pricing of the above contracts will be issued later today, which is expected to contain several clear clues about the future of interest rates in the United States.
2023-10-11 07:44:00
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