EUR/USD is experiencing a rapid loss in value.
The primary currency pair, EUR/USD, encountered significant bearish pressure on Tuesday, resulting in a current exchange rate of 1.0586 for the Euro.
The yield on 10-year Treasury bonds surged by more than 45 basis points the previous day, surpassing 4.5% for the first time since 2007. This substantial increase offered robust support to the US dollar.
This shift can be attributed to a combination of economic factors, the firm stance of the Federal Reserve, and the presence of a budget deficit in the United States.
Investors are foreseeing a 40% chance of another interest rate hike within the year. Meanwhile, the possibility of an interest rate increase by the European Central Bank remains minimal. This disparity in interest rates and expectations is bolstering the position of the USD.
Market sentiment implies that the USD exchange rate will decline once short-term rates reach their peak. However, this threshold has not been crossed yet.
The Euro is currently experiencing a quarterly decline of 3%, marking its weakest performance in 2023.