Euro Under Negative Pressure Due to Interest Rate Differential Concerns

• The US dollar maintains its gains against a basket of global currencies • US Treasury yields trade near a 19-year high • Less hawkish remarks from the European Central Bank President • Declining expectations for a European interest rate hike in October. The euro retreated in the European market on Tuesday against a basket of global currencies, continuing its losses for the second consecutive day against the US dollar, nearing a two-month low under negative pressure due to concerns over widening interest rate differentials between Europe and the United States. According to the CME Group's 'FedWatch' tool, the pricing for the probability of the Federal Reserve keeping interest rates unchanged at the October meeting is currently stable at 30%, while the probability of a 25-basis-point rate hike is at 70%. Regarding interest rate differentials, following the Federal Reserve's recent 25-basis-point hike to the 4% range, the gap between European and US interest rates has widened to 135 basis points in favor of the US dollar, which enhances investment opportunities in the US dollar against the euro. • The Reserve Bank of Australia raises interest rates to a 15-year high • Reserve Bank of Australia: Upside risks are already materializing • Stable expectations for an Australian interest rate hike next November • Markets await comments from Governor Michele Bullock. US stocks fell on Monday as oil prices and Treasury yields rose, while investors assessed uncertainty regarding the prospects of a peace agreement to end the war with Iran and its impact on the Federal Reserve's interest rate path.