Euro rose in European trade against a basket of major rivals, resuming gains against the US dollar on profit-taking off five-month highs.
The common currency is on track for the second monthly profit in a row on hopes of a reduction in the US-European interest rate gap throughout 2024.
Euro is also heading for the first yearly profit in three years against the dollar following the ECB's bullish stance on 2024 compared to the Federal Reserve.
EUR/USD
EUR/USD rose 0.2% to 1.1084, with a session-low at 1.1059, after losing 0.4% yesterday, the first loss in five days on active profit-taking away from a five-month high at 1.1139.
Monthly Trades
Euro is up 1.8% so far this month against the greenback on track for the second straight monthly profit.
The US-EU interest rate gap stands currently at 100 basis points, the lowest such gap since May 2022, and is expected to shrink even further in March 2024 when the Federal Reserve is expected to enact its first interest rate cut.
The European Central Bank has taken a more bullish stance, in turn hurting chances of early European interest rate cuts in the first half of 2024.
The ECB asserted its policy decisions will depend on inflation outlook and the impact of the monetary policies over the next few months.
ECB President Christine Lagarde outright said it's still too early to talk about cutting interest rates as household inflation remains stubborn.
Yearly Traded
EUR/USD is up by over 2.5% this year on track for the first yearly profit in three years.
The ECB was more aggressive in its outlook this year compared to the Fed, raising interest rates by 200 basis points, compared to 100 basis points by the Fed.
Thus the US-EU interest rate gap shrank from 200 basis points in January 2023 to just 100 basis points now.
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