The euro experienced a decline, reaching its lowest level since early April, primarily due to the strengthening US dollar. This dollar strength is attributed to easing trade tensions between the US and China. Changes in market expectations regarding ECB monetary policy also appear to be influencing the euro’s performance.
- The euro weakened to around $1.10, the lowest since April 9.
- Easing trade tensions between the US and China boosted the US dollar.
- US and China agreed to a 90-day tariff reduction following Geneva talks.
- Markets now price the ECB’s deposit facility rate at 1.75% by year-end.
- As recently as April 25, markets had expected a rate below 1.55%.
The combination of factors is creating downward pressure on the euro’s value. A stronger dollar, fueled by improved trade relations, makes the euro relatively less attractive. Furthermore, shifts in expectations concerning future monetary policy by the European Central Bank also contribute to this depreciation, suggesting that the currency’s outlook is tied to both global trade dynamics and European economic policy decisions.