The euro rose in the European market on Wednesday against a basket of global currencies, maintaining gains for the second consecutive day against the US dollar, and is on the verge of recording its highest level in at least two weeks, as the US currency remains under negative pressure following the release of key US inflation data.

Expectations for a European interest rate cut in September have declined due to the currently entrenched inflationary pressures on European Central Bank policymakers. To reprice these expectations, investors are awaiting further economic data from the euro area.

Price Overview

Todays euro exchange rate: The euro rose against the US dollar by more than 0.1% to $1.1688, from todays opening price of $1.1674, recording its lowest level at $1.1669.

The euro ended Tuesdays session up 0.5% against the dollar, its first gain in the last three days, supported by the rise in expectations of a US interest rate cut in September.

US Dollar

The US Dollar Index fell by about 0.1% on Wednesday, extending losses for the second consecutive session, and is about to surpass a two-week low of 97.90 points, reflecting continued weakness in the US currency against a basket of global currencies.

Data released Tuesday in the US showed a moderate rise in consumer prices in July, which led to an increase in expectations for the Federal Reserve to cut interest rates next month.

Karl Schamotta, chief market strategist at Corpay, said: Core inflation remains subdued, allowing policymakers room to maneuver in response to signs of impending weakness in the labor market.

Following this data and according to CME Groups FedWatch tool: Market pricing for a 25 basis point US interest rate cut in the September meeting rose from 88% to 94%, while pricing for keeping rates unchanged fell from 12% to 6%.

To reprice these expectations, investors are awaiting key US data on Thursday and Friday, including producer prices, jobless claims, and monthly retail sales.

European Interest Rates

Recent inflation data in the euro area showed that entrenched inflationary pressures persist for European Central Bank policymakers.

According to some Reuters sources, a clear majority in the ECBs latest meeting expressed a preference to keep interest rates unchanged in September, for the second consecutive meeting.

Money market pricing for a 25 basis point ECB rate cut in September is currently steady below 30%.

To reprice these expectations, investors in the coming period are awaiting numerous economic data releases in Europe, in addition to monitoring comments from ECB officials.