Forex News – Euro could rise further on speculation of interest rate hike

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The Euro opened the new trading week with a fresh one-month high, edging up from Friday’s high of 1.4640 to 1.4657 just as European session trading began.

The Single currency is riding high on a wave of optimism given by various current news. The falling US Dollar is supporting the Euro after the weakest U.S. jobs growth in eight months in May has knocked the greenback lower across the board since the release of disappointing non-farm payroll data last Friday.

Meanwhile, the IMF-EU-ECB agreed on Friday with Greece on a new financial rescue package, which helps Greece avoid an immediate default. This boosted the Euro. Also, there is talk in the markets that the Single Currency has the possibility to rise even further on increasing speculation of a rate hike by the European Central Bank as early as July . The ECB will be meeting this Thursday and the focus will be on any hints of a rate hike.

“The ECB is likely to send a relatively hawkish message — after all, growth in the Euro area has been amongst the most resilient (and data surprises the least negative),” Barclays Capital strategists said in a note.

“It is therefore quite possible that the Euro retests higher levels, especially against the backdrop of an improvement of the picture for peripheral bond markets.”

A increase in the rates will create an interest differential in favour of the Euro, since the US will unlikely raise interest rates in the near future, and neither will the UK.