The euro experienced a slight decline in late September, falling below $1.17 and effectively negating earlier gains from its peak earlier in 2021. The currency’s overall performance for the month was largely unchanged, reflecting the competing influences of monetary policy expectations and emerging trade tensions. Traders are weighing the anticipated future actions of the Federal Reserve against the European Central Bank’s current stance.
- The euro dropped below $1.17 in late September.
- The euro’s late September decline erased gains from its early-month 2021 peak.
- Markets expect the Fed to deliver at least two more 25bps rate cuts this year.
- Recent data highlights the resilience of the US economy and labor market.
- Expectations point towards the end of the ECB’s easing cycle after the central bank left rates unchanged for a second straight meeting in September.
- Economic indicators in Europe paint a mixed picture: services PMIs show recovery signs, while the manufacturing slump deepens.
- US President Trump announced a 100% tariff on branded or patented pharmaceutical products.
- The European Commission said it had secured a 15% ceiling on US tariffs for pharmaceuticals.
- The EC is preparing to impose tariffs of 25% to 50% on Chinese steel imports.
The information suggests a period of uncertainty for the euro. While the potential for further interest rate cuts in the US could weaken the dollar and, by extension, support the euro, the strengthening US economy could have the opposite effect. The mixed economic data coming out of Europe adds to the ambiguity, and the specter of trade wars introduces another layer of complexity. The future value will likely depend on how these various factors play out.