The euro experienced a decline against the US dollar, nearing $1.15 and hitting a three-month low, driven by investor reactions to recent policy decisions and shifting expectations regarding future interest rate adjustments. While Eurozone manufacturing activity showed signs of stabilization, this offered limited support to the currency.
- The euro extended its decline toward $1.15, reaching three-month lows.
- Eurozone manufacturing activity stabilized in October, but provided little support.
- The European Central Bank (ECB) left interest rates unchanged.
- The ECB maintained an optimistic growth outlook and steady inflation projection.
- Eurozone inflation eased to just above the ECB’s 2% target.
- Third-quarter GDP growth exceeded expectations.
- October business surveys suggested improving sentiment.
- The US dollar strengthened as expectations for Federal Reserve rate cuts decreased.
- Federal Reserve Chair Jerome Powell cautioned that further easing in December is “not a foregone conclusion.”
The currency’s weakness suggests that the market is prioritizing the outlook for interest rates in both the Eurozone and the US. While positive economic data emerged from the Eurozone, the ECB’s cautious stance on monetary policy, coupled with a strengthening US dollar due to reduced expectations of further Federal Reserve rate cuts, has created downward pressure on the euro. Investors appear to be anticipating a divergence in monetary policy between the two regions, favoring the dollar in the short term.