Euro Rises Amid ECB Rate Hike Hopes

(RTTNews) - The euro strengthened against most major currencies in the European session on Tuesday, amid expectations that the European Central Bank (ECB) would raise rates this week.

Investors speculate that the ECB will tighten its monetary policy at Thursday's meeting. The slow Eurozone will discourage the ECB from pursuing an aggressive monetary policy; therefore, it is widely anticipated that the bank will raise its deposit rate by 25 basis points to 2.25% amid high inflation and hint at a pause.

European stocks traded higher, while the dollar fell from a two-month high and Brent crude futures fell below $93 a barrel after Israel and Iran agreed to halt attacks against each other, boosting hopes that peace negotiations could move forward.

Investors also cheered data that showed China's exports and imports expanded rapidly in May.

Closer home, German industrial output increased 0.4 percent on a monthly basis, in contrast to the revised 0.1 percent fall in March, Destatis reported.

The monthly growth rate came in line with expectations and marked the first monthly increase in five months.

Separate set of data revealed that German exports grew at a faster pace of 0.9 percent month-on-month in April, following March's 0.3 percent increase. Economists had forecast exports to fall 0.3 percent.

Meanwhile, growth in imports eased notably to 1.2 percent from 4.5 percent.

In the European trading today, the euro rose to 4-day highs of 1.1570 against the U.S. dollar and 185.29 against the yen, from early lows of 1.1527 and 184.61, respectively. If the euro extends its uptrend, it is likely to find resistance around 1.17 against the greenback and 188.00 against the yen.

Against the Swiss franc and the Australian dollar, the euro advanced to near 1-1/2-month highs of 0.9212 and 1.6406 from early lows of 0.9193 and 1.6338, respectively. The euro may test resistance around 0.93 against the Swiss franc and 1.66 against the aussie.

The euro climbed to a 4-day high of 1.6119 against the Canadian dollar, from an early low of 1.6082. On the upside, 1.63 is seen as the next resistance level for the euro.

Looking ahead, U.S. ADP weekly employment data, U.S. and Canada trade data for April, U.S. Redbook report, U.S. existing home sales data for May and wholesale inventories for April are slated for release in the New York session.