Expected rate cut boosts Euro

The Euro continues to trade higher against the greenback and is on track for its fourth straight day of gains while highest level since August 11 during the Asian session on Tuesday. We may be looking at 1.10 by the end of the week as traders turn against the dollar on predictions that the US Federal Reserve is done with their rate hiking cycle.

The USD Index which tracks the Greenback against a basket of currencies, is also under pressure falling to a three-month low and on top of a possible Fed pause in rate cuts, the increasing likelihood of earlier rate cuts by the US central bank in 2024 while the European Central Bank is expected to sit tight is also seen benefiting the European currency.

According to market pricing, the Fed may begin cutting rates early as March 2024. while ECB President Christine Lagarde noted yesterday that the fight in the Eurozone to bring prices under control is far from over  forcing market participants to scale back their expectations that the next move by the central bank is set to be a rate cut.

The main drivers of the EUR/USD currency pair in today’s European session will be the release of the German GfK Consumer Climate figures as well as a another monetary speech following up from yesterday by ECB president Lagarde

From the US investors will await the release of US Consumer Confidence figures from the US as well as a number of speeches by several FOMC members. Key inflation data from the Eurozone and the US Due out later this week may see traders refrain from taking big positions either way and the Euro is expected to remain fairly range bound over the coming days.