Euro rose in European trade on Thursday against a basket of major rivals, extending gains for the second day against the dollar and approaching one-week highs amid a strong risk appetite in the market.

The common currency is trying to recover from recent five-month lows, trading above $1.07 once more.

However negative pressures remain, with the ECB likely to start cutting interest rates soon as inflation approaches 2%.

The Price

EUR/USD rose 0.2% to $1.0690, with a session-low at $1.0664, after rising 0.5% on Wednesday, the first profit in seven days away from five-month lows at $1.0601.

Positive Outlook

Global markets are dominated by a wave of surging risk sentiment, as US treasury yields slow down, while concerns about a wide-scale Iran-Israel conflict fade.

Interest Rate Gap

The current European-US interest rate gap stands at 100 basis points, the lowest since May 2022, and is expected to widen to 125 basis points in June.

Negative Pressures

City Indexs analysts have noted the increased pressures on the euro amid expectations of ECB interest rate cuts in the summer, while the Federal Reserve is likely to hold off such a move.