The euro is declining. Overview for 26.09.2023

The primary currency pair faced significant bearish pressure on Tuesday. The current EURUSD exchange rate stands at 1.0586.

The yield on 10-year Treasury bonds increased by over 45 basis points the previous day, surpassing 4.5% for the first time since 2007. This surge provided substantial support to the US dollar.

This shift can be attributed to a combination of economic factors, the Federal Reserve's firm stance, and the presence of a budget deficit in the country.

Investors anticipate a 40% likelihood of another interest rate hike within this year. Meanwhile, the chances of an interest rate increase by the European Central Bank remain minimal. This disparity in interest rates and expectations is strengthening the USD's position.

Market sentiment suggests the USD exchange rate will decline once short-term rates reach their peak. But for now, this threshold has not been crossed.

The Euro is currently showing a quarterly decline of 3%. This marks the weakest performance in 2023.