The euro fell sharply against the dollar as new business activity data painted a concerning picture of the eurozone economy. According to S&P Global, the dominant services sector within the region stalled, and the manufacturing downturn accelerated. This slump has led traders to increase bets on further rate cuts from the European Central Bank (ECB) this year. Currently, the euro stands at $1.1122, dropping 0.4%. Although it recovered slightly from earlier losses of 0.7%, the currency remains below its late August peak.
Traders now expect around 44 basis points in cuts from the ECB this year, a slight increase from last week’s expectation of 38 bps. The bleak outlook stems from poor economic performance across key countries in the bloc. Germany’s decline has worsened, and France is back in contraction after a short-lived boost from the Olympic Games. With such a broad-based downturn, many market analysts predict that the ECB could implement a rate cut as early as October.
In comparison, the U.S. dollar index continues to strengthen. Rising 0.1% to 100.92, the dollar holds its ground after reaching a one-year low last week. This rise is further supported by U.S. political developments, with Republicans in the House unveiling a three-month stopgap bill aimed at preventing a government shutdown. This move provides further stability to the greenback in an otherwise volatile Forex market.
The impact of these developments is not confined to the euro and dollar alone. The British pound remained almost flat at $1.3314 after initially dropping 0.5% earlier in the session. While British businesses reported a slowdown in growth, it was less severe than in the eurozone, which helped stabilize sterling. Other currencies saw mixed performances as well. The Swiss franc was stable at 0.8497 per dollar, while the Swedish crown slipped 0.3% ahead of rate cuts expected from their respective central banks. The U.S. dollar also slipped against the yen, though thin trading was observed due to a public holiday in Japan.
Despite the economic uncertainty, one sector that saw gains was cryptocurrency. Bitcoin edged up 0.5% to $63,507, continuing its positive momentum after reaching a one-month high of $64,730 earlier in the day.
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The euro weakened against the dollar as traders anticipate further ECB rate cuts this year due to poor eurozone business activity.
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