Euro Holds Recovery on Hopes of European Interest Rate Hikes

The euro rose in the European market on Tuesday against a basket of global currencies, stabilizing its recovery from low levels against the US dollar and moving toward a third gain in the last four days. It benefited from the pause in the US dollar’s rise while awaiting new evidence on the Federal Reserve’s interest‑rate path.

Reports indicated that the European Central Bank is considering raising interest rates at its next October meeting, for the second consecutive time, amid rising inflationary pressures from higher oil and natural gas prices and escalating geopolitical tensions in the Middle East.

The US dollar fell on the dollar index on Tuesday by 0.1%, resuming losses that had paused yesterday and moving away again from its highest levels in seven weeks, reflecting a decline in the US currency against a basket of global currencies.

Interest‑rate spreads widened after the Federal Reserve last week raised US rates by about 25 basis points to a 4% range, expanding the spread between Europe and the US to 135 basis points in favor of US rates, which enhances investment opportunities in the US dollar versus the euro.

The Nasdaq index jumped to a new record close on Monday, supported by gains in Advanced Micro Devices (AMD) shares and other major AI‑related companies. Treasury bond yields fell from their recent highs, and crude oil prices dropped to their lowest level in 11 days amid speculation of a breakthrough in Middle East talks at a UN meeting this week.

Crude oil prices fell sharply on Monday, trading below $100 per barrel after reports that US President Donald Trump decided not to bomb Yemen at present and expressed openness to diplomacy with Iran.