Title: Euro Heads for Second Consecutive Weekly Decline amid Dollar Strength and ECB Speculations
Original Source: Economies.com | Authored by Mahmoud Abdulrahman
Link: [economies.com article](https://www.economies.com/forex/eur-usd-news/euro-on-track-for-second-weekly-loss-in-a-row-48083)
The euro is on course for a second straight week of losses against the US dollar, driven by continued strength in the greenback and increasing investor expectations for a divergence in monetary policy between the European Central Bank (ECB) and the US Federal Reserve.
On Friday, June 7, the EUR/USD pair continued its downward trend in early European trading. The pair initially dipped by approximately 0.2 percent to 1.0885, following a 0.4 percent decline in the previous session. This downward pressure comes ahead of the release of key US employment data that could further shape expectations around the Federal Reserve’s policy outlook.
Overview of Recent Movements in EUR/USD:
– The euro fell to 1.0885 during early Friday sessions in Europe.
– Thursday saw a significant 0.4 percent drop, triggered partly by dovish signals from ECB policymakers.
– Heading into the weekend, the euro is lagging behind on a weekly basis, likely to mark its second consecutive week of losses.
– Technical patterns suggest persistent bearish momentum on the EUR/USD chart.
The euro’s continued softness reflects both internal euro zone dynamics and broader global trends influenced by economic data releases from the United States. The dollar remains buoyed by strong economic fundamentals as investors weigh the potential timing of interest rate changes on both sides of the Atlantic.
US Dollar Bolstered by Hawkish Fed Expectations
The main driver of recent strength in the US dollar has been renewed market confidence that the Federal Reserve will keep interest rates elevated for a longer period than was previously expected. Despite signs of moderation in inflation, particularly core PCE data, Fed officials have emphasized the importance of maintaining tight monetary policy until clear and sustained disinflation trends are evident.
Key Factors Supporting the US Dollar:
– Federal Reserve officials remain cautious about early rate cuts without stronger data confirmation.
– Economic indicators suggest that the US labor market remains resilient.
– Traders are now expecting fewer interest rate cuts from the Fed in 2024, possibly starting as late as September or later.
– Strong employment and service-sector growth printed earlier this week underpinned the dollar’s strength.
As a result, the euro continues to struggle against the greenback, with traders positioning themselves ahead of the widely anticipated May non-farm payrolls (NFP) report from the United States. A stronger-than-expected jobs report may accelerate dollar gains, further pressuring the euro.
ECB Implements First Interest Rate Cut Since 2019
In a historic policy move, the European Central Bank cut its benchmark interest rate by 25 basis points on Thursday, bringing down the deposit rate from 4.0 percent to 3.75 percent. This marks the first rate cut by the ECB since 2019, signaling the beginning of what could be a gradual easing process amid softening inflation and weakening growth across the Eurozone.
Highlights of the ECB Decision:
– ECB reduced key policy rates by 25 basis points on June 6.
– The cut comes after nine consecutive hikes that sought to tame inflation over the past two years.
– The policy statement acknowledged progress in controlling inflation, although it expressed caution about near-term risks.
– Inflation in the Eurozone has cooled to 2.6 percent, down from a peak of 10.6 percent in late 2022.
However, despite this initial rate cut, ECB President Christine Lagarde avoided signaling a predictable rate-cutting cycle, cautioning that future decisions will depend on evolving economic data.
Lagarde’s Comment Highlights:
– Future policy decisions will follow a “meeting-by-meeting” approach
Read more on EUR/USD trading.