The European currency counterbalanced the greenback as investors anticipate the Fed’s decision next week.
He global dollar fell on Thursday in front of the fortress of euro, after the European Central Bank lowered interest rates and ECB President, Christine Lagarde, lowered expectations for another cut next month, saying the bank will let economic data dictate the next monetary policy move. Uruguay, Meanwhile, the currency achieved its fifth consecutive rise and was above 41 pesos.
He dollar index, The index, which measures the greenback’s performance against a basket of six major international currencies, fell 0.41% to 101.36, driven in part by gains in the euro, the largest component of the index, just days after the Federal Reserve (Fed) hold a new meeting of the Federal Open Market Committee (FOMC) and decide what is still expected to be the first cut in interest rates, which are at an all-time high.
Specifically, the euro rose 0.37% to $1.105, but has fallen 0.5% so far this week. Compared to the yen, he dollar lost 0.2% on the day to 142.07, after gaining 0.2% so far this week.
On Wednesday, the currency had fallen as a result of what the markets interpreted as a victory for Kamala Harris in view of Donald Trump in the presidential debate; but then, the data from the consumer price index in the United States showed a slight rebound in August, with the underlying inflation showing some rigidity. As a result, traders reduced bets on a 50 basis point rate cut by the Fed. Fed on September 18 to 13% from 40% a week ago, the tool showed. Fedwatch of CMEGroup.
Euro strengthens after four-week lows
On the strength of the euro, It is worth noting that after the 25 basis point easing of rates amid a slowdown in inflation and economic growth, Lagarde warned: “We will decide meeting by meeting.”
He ECB The Fed cut its deposit rate to 3.5%, as widely expected. However, the refinancing rate was cut by a much larger amount, 60 basis points, to 3.65%, in a long-announced technical adjustment.
The rate futures have reduced bets on an October rate cut to just over seven basis points from 10 basis points just before Lagarde spoke, according to LSEG calculations.
“Looking ahead, the path of interest rates remains uncertain,” he told Reuters. Yael Selfin, chief economist at KPMG in the UK. “While there is widespread consensus in the Governing Council “On the issue of whether political restrictions should be eased, there remain divergent views on the pace of cuts,” he added.
Selfin expects further easing measures to be implemented in December, which would reduce the deposit rate to 3.25%. If the outlook for the eurozone weakens further, ECB authorities will increase the pace of cuts next year to a terminal rate of around 2.25%.
Source: Ambito
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