There were modest gains for the euro and pound sterling on Tuesday, attributed to a brief halt in rising oil prices. The two currencies are now nearing their recent most highs against the US dollar. Interestingly, the Japanese yen and Swiss franc also had increases, adding some stability to the global currency market, despite a subdued US dollar.
The expectation of substantial interest rate cuts by the U. S Federal Reserve introduces an air of uncertainty, putting the dollar under pressure. While analysts are certain about a rate cut in September, the magnitude of the cut is a source of debate. This uncertainty is affecting investor decisions, fostering volatile market conditions. This has led to many investors taking a cautious approach, waiting for more solid information from the Federal Reserve.
The euro and pound sterling each increased about 0.1% on Tuesday, hitting $1.1169 and $1.3203 respectively. The euro is hovering near Monday’s 13-month high, while the pound mirrors its highest point from over two years ago. The upward trend continued into Wednesday, with both currencies increasing by another 0.2%.
Euro and pound perform well amid turbulence
The euro stays near highs and the pound maintains its strength, reflecting their stable performance.
However, despite the dollar’s weakening benefitting both currencies, Chris Turner, ING’s global head of markets, suggests that there could be limits to the potential for further growth. This line of reasoning hints at a potential future stabilization of the EUR/USD exchange rate. Caution should be exercised when looking at broader market trends and making further decisions.
Interestingly, the recent increase in oil prices has halted after increasing 7% in just the past three sessions. This has been good news for the Canadian dollar, which achieved a five-month high on Monday. The yen has weakened slightly while the euro remained steady due to a 0.2% increase in the U.S dollar index. The Australian and New Zealand dollar both saw a modest rise, whereas the Swiss franc lost against the strengthening dollar.
The global currency market has demonstrated resilience amidst economic fluctuations, with some currencies showing strength while others are in downtrends. With changes in oil prices, the market is expected to adjust and future trends will be closely monitored.
Following comments by Jerome Powell, Chair of the Federal Reserve and Mary Daly, San Francisco Fed President, many are predicting a quarter-percentage point drop in borrowing costs next month. This could potentially ease the financial burden faced by businesses and individuals.
Last but not least, both the Australian dollar and the Swiss franc are expected to maintain momentum, staying near their recent highs. With a gain of 0.23%, the Australian dollar nears its one-month peak, while the Swiss franc sits at its strongest point in three weeks.
