The euro rose in European trading on Tuesday against a basket of major currencies, extending its gains for the fifth consecutive session against the US dollar and reaching a one-week high, as market sentiment improved amid positive developments in USChina trade negotiations.

These gains were also supported by a weaker US dollar ahead of Wednesdays widely expected Federal Reserve rate cut, with strong odds pointing to another reduction before the end of the year.

Renewed inflationary pressures in the eurozone have diminished expectations for the European Central Bank to cut interest rates during its meeting this week. The details of that meeting are expected to provide stronger guidance on the path of European rates for the remainder of this year and into 2026.

Price Overview

EUR/USD rose 0.2% to 1.1667, its highest level in a week, from an opening price of 1.1644, after touching a low of 1.1644.

The euro closed Monday up 0.15% against the dollar, marking its fourth straight daily gain amid improving risk appetite across markets.

Trade Developments

Attention is now turning to the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea on Thursday. Speaking to reporters aboard Air Force One before landing in Tokyo, Trump said, I have great respect for President Xi, and I think well reach an agreement.

Analysts noted that signs of progress between the two countries and the possibility of the US reducing tariffs on China were enough to lift investor sentiment and boost demand for risk assets.

US Dollar

The US Dollar Index fell more than 0.2% on Tuesday, extending losses for the second straight session and reflecting continued weakness in the greenback against major and minor peers.

The dollars decline comes ahead of Wednesdays expected 25-basis-point rate cut by the Federal Reserve its second consecutive reduction with markets also anticipating signals of another cut before year-end.

European Central Bank

The European Central Bank meets on Wednesday and Thursday to assess the appropriate monetary stance in light of recent economic developments in the euro area.

The bank is widely expected to keep interest rates unchanged at 2.15%, their lowest level since October 2022, marking the third consecutive meeting without a policy adjustment.

Markets continue to look for clearer guidance on when the ECB might resume its rate-cut cycle before the end of the year.