Widening US-EU interest rate differentials drive EUR/USD lower, with Fed hike bets rising and ECB tightening expectations trimmed.
EUR/USD opened the week lower as widening interest rate differentials between the US and Eurozone weighed on the euro. The spread between USD and EUR rates pushed higher, pressuring the currency pair near term.
Markets are pricing in a potential further Federal Reserve rate hike following new Chair Kevin Warsh’s first FOMC meeting, while ECB tightening expectations have eased after comments from President Lagarde. US yields rose roughly 5 basis points across the curve, while European yields declined by a similar margin.
Euro area consumer confidence improved to -17.7 in June, aligning with consensus, but remains below pre-war levels and historical averages. Flash PMIs for June are due later this week, with manufacturing expected to dip to 50.9 from May’s 51.6.