The euro rose in European trading on Tuesday against a basket of major currencies, extending gains for the third consecutive session against the US dollar, as the recovery from recent lows continued, supported by ongoing weakness in the greenback in the foreign exchange market.

The single currency is on track to achieve a second consecutive monthly gain, bolstered by the European Central Banks hawkish stance, after its recent meeting signaled no need for further monetary easing, which in turn reduced the likelihood of additional rate cuts in Europe before the end of the year.

Price Overview

Todays EUR/USD exchange rate: The euro gained about 0.2% to $1.1748, up from the sessions opening at $1.1726, with a low at $1.1712.

On Monday, the euro closed 0.25% higher against the dollar, marking a second straight daily advance, rebounding from a three-week low of $1.1646.

US Dollar

The US dollar index fell by about 0.2% on Tuesday, extending losses for a third consecutive session and hitting a one-week low, reflecting persistent weakness in the greenback against a basket of currencies.

Dollar levels remain under pressure due to mounting concerns over a potential US government shutdown, as well as strong expectations that the Federal Reserve will cut interest rates in October and December.

Markets this week await a series of key US labor market reports, alongside remarks from Federal Reserve officials, to reassess these policy expectations.

Monthly Performance

In September trading, which officially concludes with todays settlement, the euro is up more than 0.5% against the dollar, putting the currency on track for a second straight monthly gain.

European Interest Rates

As expected, the European Central Bank kept its main interest rates unchanged this month at 2.15%, the lowest since October 2022, marking a second consecutive hold.

In its policy statement, the ECB said inflation is currently approaching the 2% medium-term target and that the boards assessment of inflation expectations remains broadly unchanged.

Sources indicated policymakers believe no further cuts are needed to reach the 2% inflation target, despite updated forecasts pointing to lower rates in the coming two years.

Unless the euro area faces another major economic shock, borrowing costs are expected to remain at current levels for some time.

Money market pricing for a 25-basis-point rate cut in October dropped from 30% to below 10%.

Traders have trimmed bets on further monetary easing, signaling an end to the ECBs rate-cutting cycle this year.

Going forward, investors will closely monitor upcoming European economic data as well as ECB officials commentary to reassess the outlook.