The euro weakened against the dollar, reaching a three-month low. This movement is influenced by expectations that the European Central Bank (ECB) will maintain its current interest rates, spurred by data indicating a slowdown in wage growth. Meanwhile, positive data showed improvement in Eurozone private sector activity, but the dollar strengthened as bets on Federal Reserve rate cuts decreased.
- The euro traded around $1.15, hitting a three-month low.
- ECB wage data showed average wage growth slowing to 3.0% in 2025, 4.9% in 2024, and 2.2% by Q3 2026.
- Eurozone private sector activity expanded at its fastest pace since May 2023.
- The ECB held rates steady, maintaining a cautiously optimistic growth outlook and leaving its inflation forecast unchanged.
- The US dollar strengthened due to scaled-back bets on additional Fed rate cuts.
The confluence of factors presents a mixed outlook for the euro. While economic activity in the Eurozone is improving, the expected slowdown in wage growth is likely to influence the ECB’s monetary policy decisions. This, combined with a stronger dollar driven by changing expectations regarding US interest rates, suggests continued pressure on the euro in the near term.