Euro Pumps to 1-Mth Highs, Equities Surge on Monday

Ukraine’s offensive was successful (so far)

Today’s small improvement in mood was aided by the significant territorial advances made by Ukrainian forces over the weekend.

More than 3,000 square kilometers (1,160 square miles) have been retaken by Ukraine this month, according to Ukrainian chief commander General Valeriy Zaluzhnyi, with the majority of this ground coming as a result of a weekend offensive that compelled Russia to abandon its primary logistics hub in the Kharkiv region.

As a result, the EURUSD pair rose 1.5% to one-month highs, trading near 1.02 at the last check, trying to break from the long-term bearish channel. That could lead to another relief rally, likely targeting 1.035.

Additionally, today’s EURUSD jump was further supported by several news outlets reporting that the ECB is planning to start discussing quantitative tightening in October,

According to Reuters, ECB policymakers believe there is a growing likelihood that they would need to increase their benchmark interest rate by at least 125 basis points in order to combat the Eurozone’s record-high inflation despite an impending recession.

Fed on track to deliver 75bps

Before the weekend, a number of FOMC officials reaffirmed their belief that it is acceptable to keep eliminating policy accommodations. Federal Reserve Governor Christopher Waller stated on Friday, “I favor another big raise in two weeks,” but the dollar did not conclude the week on a strong note.

As a result, the CME Group FedWatch Tool reveals that markets are pricing in a 75 basis point (bps) rate rise with a 90% likelihood.