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Euro’s Poor Performance Against Dollar Continues

thetradingbay

The euro has continued to fall, registering a new 20-year low against the greenback, as investors continue to anticipate ECB interest rate hikes, a move many experts believe will stabilize the economy.

Euro dropped nearly 0.9% during London trading hours, its weakest level since December 2002. Elsewhere, money markets have lowered ECB tightening bets to below 140 basis points this year. This is coming after French services PMI was lowered Tuesday. With the new figures lowered from 190 basis points almost three weeks ago, it has further increased interest rate differentials with the U.S. Federal reserves.

Reports yesterday showed that the euro has dropped by nearly 8% against the dollar this year alone, causing inflation to bite harder, with households and firms taking the biggest hit. Also, the war in Ukraine has negatively impacted Europe’s economy, forcing the ECB to hold back on interest rate hikes. Another thing pushing the euro lower is the current energy crisis rocking the region.

Experts believe Tuesday’s losses were largely because of poor liquidity and selling in the euro-Swiss franc.

As of the time of writing this report, EUR/USD was down by almost 1% and currently trading at 1.0314. Meanwhile, the dollar index is up by 0.82% and currently trading at 106.01. And should things continue in this direction, the euro is set to trail the dollar all through the week.

We are still deep into London trading sessions and don’t know how the New York trading session will play out. We will keep an eye out to see how the euro performs against the dollar when the market opens in the U.S.

For now, we expect the euro to enter the New York session on a back foot. Also, with lots of economic activities lined up for the week, hopefully, the euro will be able to recover from its 20-year low record.

We are still looking for pointers on how Europe plans to address the energy crisis rocking the region, even in the face of the war in Ukraine. We will bring you updates should anything come up.

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