Euro and Pound Surge Amid Oil Price Stabilization and Prospective Fed Rate Cuts

On Tuesday, the euro and pound nudged higher, buoyed by a pause in the rise in oil prices and the prospect of U.S. rate cuts. Investors anticipate a Federal Reserve rate cut in September, with debates over a 25 or 50 basis point reduction. The dollar index remained just off a one-year low.

On Tuesday, the euro and pound recorded a slight increase, supported by a halt in the rising oil prices and expectations of imminent U.S. rate cuts. Investor sentiment has swung towards a Federal Reserve rate cut in September, with speculation mounting over whether the reduction will be 25 or 50 basis points.

The euro and sterling each rose by approximately 0.1%, reaching $1.1169 and $1.3203 respectively. Both currencies have recently benefited from a weakened dollar, but future gains may prove challenging. Chris Turner, global head of markets at ING, indicated a likely trading range of 1.1100-1.1200 for the euro/dollar pair, pending U.S. economic data.

Meanwhile, the Canadian dollar reached a five-month high, benefitting from rising oil prices, while the yen weakened. This left the dollar index at 100.88, just shy of its lowest point in a year. Market participants have already factored in a cut next month, with projections suggesting up to 100 basis points worth of easing by year-end.

(With inputs from agencies.)