The euro experienced a decline against the dollar, reaching a two-week low. This downturn is primarily attributed to a strengthening dollar, fueled by reduced expectations of a Federal Reserve rate cut in December. While the ECB is expected to maintain stable interest rates in the near future, improved Eurozone growth forecasts offer a counterbalance.
- The euro slipped to $1.15, a two-week low.
- A stronger dollar, driven by reduced expectations of a Fed rate cut, is weighing on the euro.
- The cancellation of the October employment report and FOMC minutes showing divided policymakers contributed to the shift in Fed rate cut expectations.
- The ECB is expected to keep interest rates unchanged through the end of 2026.
- Eurozone inflation is near the 2% target, with stable economic growth and record low unemployment.
- The European Commission raised its Eurozone growth forecast for 2025 to 1.3%, up from 0.9%, citing a surge in exports to the US.
- Eurozone growth is projected to ease to 1.2% in 2026, down from 1.4%, before edging up to 1.4% in 2027.
The euro’s performance appears to be intricately tied to the monetary policies of both the Federal Reserve and the ECB. While the prospect of continued stable interest rates and positive economic indicators in the Eurozone could provide some support, the potential for shifting sentiments regarding US monetary policy looms large, exerting downward pressure on the currency. The Eurozone’s growth forecast improvements and export increases provide some counterweight against a stronger US dollar.