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US Dollar Appreciates Against Euro Amid Rate Cut Expectations

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Muhammad Jawad
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US Dollar Appreciates Against Euro Amid Rate Cut Expectations

The US dollar has shown a slight appreciation against the euro in recent forex market operations. At 09:00 hours, the dollar/euro exchange rate stood at 0.93 euros, marking an increase of 0.11% compared to the previous day's close. Observing the dollar's performance over the past week, it has appreciated by 0.94%. However, when compared to the same period last year, the US currency shows a depreciation of 0.9%. Despite daily fluctuations, the American currency has maintained a trend of gains over three consecutive sessions.

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A Closer Look at the Numbers

When it comes to annual context, the dollar reached its highest value at 0.96 euros and its lowest at 0.89 euros. It currently operates closer to its peak than its floor. The volatility over the last week has been remarkably low compared to the annual volatility, indicating that the movements in the dollar's quotation have been relatively stable recently.

Factors Influencing the Forex Market

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The strengthening of the dollar against the euro is due to the expectations of a rate cut in the European Union. The dollar index is approaching its two-week highs, while the euro weakens due to the expected European rates. The European Central Bank (ECB) will set interest rates next Thursday and is almost certain to keep them at the current historical high of 4%. The Federal Reserve and the Bank of England are likely to maintain rates on Wednesday and Thursday, respectively.

Implications for the Dollar

According to the FedWatch tool from CME, traders have valued a 60% chance that the central bank will cut rates in March. They have also discounted at least 125 basis points of cuts next year. Regarding cryptocurrencies, Bitcoin was down 0.5% at $43,868, after exceeding $44,000 at the beginning of the session. The euro dropped 0.2% against the dollar, settling at a three-week low of $1.0773, as markets adjust downward expectations of rates after discouraging data and pessimistic comments from central banks.

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