Euro Falls to Multi-Month Lows Against Strong Dollar Amid Divergent Central Bank Outlooks and Upbeat US Data
| Pair | Now | Since publish |
|---|---|---|
| EURUSD | — | — |
- EUR/USD hits 16-month low near 1.1330 on strong US data.
- ECB’s Lagarde signals “measured response,” dampening October hike hopes.
- US PMI strong at 58.4 vs Eurozone’s 53.1.
- Markets await Germany Retail Sales data today.
The Euro (EUR) has fallen to its lowest levels against the US Dollar (USD) since late July, trading near 1.1330 by Tuesday, with some sources noting a 16-month low. This significant depreciation follows the release of September flash Purchasing Managers’ Index (PMI) data, which showed a mixed picture in the Eurozone but a notably stronger-than-expected performance in the US. While the Eurozone’s Composite PMI rose to 53.1, its highest since April 2023, driven by robust services, the US S&P Global Composite PMI surged to 58.4 from 56.0 in August, indicating strong business activity.
The divergence in currency performance was primarily fueled by reinforced expectations of further Federal Reserve (Fed) interest rate hikes, supported by hawkish remarks from Fed officials and rising US Treasury yields. Conversely, European Central Bank (ECB) President Christine Lagarde’s comments on Monday, emphasizing a “measured response” to inflation and noting no clear wage-price spiral, were perceived as dovish, tempering market expectations for an October ECB rate increase. Elevated crude oil prices, exacerbated by ongoing Middle East tensions, also contributed to the US Dollar’s strength by fueling inflation concerns and further bolstering Fed tightening bets.
The Euro (EUR) continued its decline on Wednesday, trading around 1.1330-1.1335 against the US Dollar (USD). This renewed weakness is largely attributed to ECB President Christine Lagarde’s dovish comments on Tuesday. Lagarde stated that rising bond yields will curb economic expansion and limit the transfer of elevated energy costs to inflation. She also emphasized the need for a “measured response” from the central bank, noting the absence of second-round inflation effects. These remarks have reduced market expectations for an October ECB rate hike. Traders are now awaiting Germany’s August Retail Sales data later on Wednesday.