The euro came under pressure on Tuesday after a friendly start.

The common currency thus continued its recent losses and reached its lowest level in over two years at 1.0673 US dollars.

At midday, the euro was trading at $1.0688.

The European Central Bank (ECB) had set the reference rate at $1.0746 the day before.

The euro is being weighed down primarily by the high interest rate expectations in the USA.

The Federal Reserve is expecting a sharp turnaround in monetary policy there this year, with rapid and significant interest rate hikes.

The background is the very high inflation of 8.5 percent recently.

Many experts expect the ECB to be more cautious than the Fed.

Currency analyst Antje Praefcke from Commerzbank also sees the euro being burdened in the long term by the Ukraine war and the supply chain bottlenecks, which are again making the market more busy.

According to Praefcke, the risk of stagflation in the euro zone seems to be rising again for the market: “Even if the European Central Bank starts raising interest rates in July and thus takes a proactive approach to counteracting the risk of inflation, there is still a risk of an energy crisis leading to would lead to painful cuts in the economy.

If, on the other hand, the ECB does nothing out of economic concerns or too little from a market perspective, it risks falling behind the curve, especially since the supply chain bottlenecks in China will probably keep the price pressure simmering for months to come due to the Covid measures and the prospect of positive real interest rates (nominal interest rates minus of inflation) in the Eurozone would dwindle rapidly.”

Away from the FX market, investors showed more enthusiasm for Germany and Europe.

After the recent price losses, the Dax rose again by 0.9 percent and stood at 14,051 points in the early afternoon.

The Eurozone leading index Euro Stoxx 50 gained 0.8 percent to 3787 points.

Analysts named solid company balance sheets as the reason for the positive mood.

In addition, investors willing to take risks bought shares whose prices had fallen in the past few days.

In the further course of trading, market participants are looking at new economic data from the USA, among other things.

Some figures from the real estate market are expected, as well as order data from industry and an indicator for consumer sentiment.

A number of high-ranking representatives from the ranks of the major central banks commented.