The euro is trading just above $1.17, near its recent four-year high. This stability comes as markets assess the growing difference in monetary policy between the European Central Bank (ECB) and the Federal Reserve. Eurozone inflation has edged slightly above the ECB’s target, yet the ECB signals no immediate plans for easing monetary policy. Meanwhile, the US dollar is weakening amid expectations of interest rate cuts by the Federal Reserve and concerns about the US labor market.
- The euro traded just above $1.17, near a four-year high of $1.192.
- Markets are weighing the widening policy gap between the ECB and the Federal Reserve.
- Eurozone inflation quickened to 2.2% in September, slightly above the ECB’s mid-point target.
- ECB Vice President Luis de Guindos indicated current rates are “adequate” and decisions will be made “meeting by meeting,” suggesting no imminent easing.
The asset appears to be benefiting from a relatively stable monetary policy in the Eurozone, even with slightly elevated inflation. The currency is finding strength relative to the US dollar, which is facing downward pressure from anticipated interest rate cuts and concerns about economic data. The difference in policy expectations between the two central banks seems to be a key driver in the asset’s current position.