Euro sharpens decline to three-week trough on European interest rate cut prospects

Economies.com
2023-12-07 07:39AM UTC

Euro fell in European trade on Thursday against a basket of major rivals, heading for the seventh loss in a row against the dollar and marking a three-week trough on prospects of early interest rates cuts by the ECB in 2024. 

 

A string of cautious remarks by ECB officials came after euro zone inflation data showed prices hit 28-month lows. 

 

EUR/USD

 

EUR/USD fell 0.1% to 1.0755, the lowest since November 14, with a session-high at 1.0772.

 

The pair lost 0.3% on Wednesday, the sixth loss in a row, the longest such streak of losses since September. 

 

European Remarks 

 

Banque de France's Governor François Villeroy de Galhau said that cutting European interest rates is likely in 2024 as the economy shrinks faster than expected. 

 

European Central Bank member Isabel Schnabel said on Tuesday that more interest rate hikes in the euro zone "are unlikely", following the inflation data in November.

 

She said the data shows that inflation is losing steam but without the risk of long-term recession with it.

 

She believes that inflation is going in the right tract but there's need for progress in other major sectors.

 

The Timing of European Interest Rate Cut 

 

The European Central Bank is expected to hold interest rates flat at the December meeting next week at 4.5%, already the highest in 22 years. 

 

The probability of an ECB 0.25% interest rate cut at the March 2024 meeting stands at 85%. 

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