The euro rises as European interest rate expectations increase

Economic data supports the euro's rise

By Raed Alkhedr | @raedalkhedr | 5 July 2023

  • U.S. durable goods orders rose more than expected by 3.2% in March

  • The euro saw significant gains against most major currencies

  • The dollar index fell by 0.50% to a level of 101.30

Euro surges as European interest rate expectations increase

The euro has experienced significant gains during today's trading sessions as the European Central Bank is expected to continue its series of interest rate increases, which began last week. The currency pair is currently trading near $1.0992 levels. These gains come after statements by ECB members reaffirming the bank's commitment to monetary tightening in upcoming meetings.

ECB member Klaus Knot stated that it is too early to discuss suspending or pausing interest rate hikes, adding that the bank is closely monitoring economic developments. However, inflation is still too high and requires further monetary tightening. Pierre Wunsch, another ECB member, noted that inflation figures are not moving in the right direction and that the bank will wait for wage growth and core inflation to decrease before stopping interest rate hikes.

ECB President Christine Lagarde has also emphasized the need for the bank to do everything it can to bring inflation back to its 2% target.

Earlier, the German IFO Business Climate Index was released, which exceeded market expectations for the sixth consecutive month, with a reading of 93.6 compared to the previous reading of 91.1.

Microsoft's strong quarterly earnings boost stock market indices

The Nasdaq futures saw significant gains after Microsoft reported better-than-expected quarterly earnings, with futures rising 1%. Meanwhile, the S&P500 and Dow Jones indices rose 0.2%. Microsoft's stock rose more than 7% after exceeding Wall Street's expectations for the last quarter of the year, with the company also seeing a large jump in revenue. However, the stock fell 1% as revenue growth was only 3% on a yearly basis.

Despite most U.S. companies holding up well in quarterly earnings results to date, many pressures still weigh on investor risk appetite. Some investors believe it is still too early to see the negative effects of the Federal Reserve's strongest monetary tightening pace. Nonetheless, Microsoft's strong earnings report has given a boost to the overall market sentiment.