The European Central Bank does not deviate from the pattern provided by the market and achieves a new adjustment of 25 basis points. And as this movement has been integrated, the euro practically does not react in its exchanges with the US dollar. He the stock market closes the European session at $1,085 which implies seeing the lowest level of the Eurozone currency since early August 2024, when the financial market was faced with unforeseen US employment data and change in investment strategy. to trade with the Japanese yen which has infected the entire market.
After Lagarde’s announcement this Thursday, the euro continues to show its weakness against the dollar. The gap between the two economies’ monetary price benchmarks is widening pending the next decision by the US Federal Reserve, which would not be as aggressive as the last 50 basis point cut, according to Bloomberg. However, on this occasion the market did not expect such a sudden change in the dollar reference. In this way, the Euro down 2.5% so far in October during which it would be the most bearish month for the common currency since September 2023.
In 2024, the euro will not keep pace either dollargiven that drop of 1.7% since January 1. Even if central banks make downward adjustments to their respective monetary policies at par, the dollar finds no reason to give up its throne on the foreign exchange market. Indeed, several analysis firms estimate that the low point has not yet been reached in the fourth quarter of 2024 in the cross between the euro and the US dollar.
Even though the market consensus reported by Bloomberg expects the the euro regains ground at the end of 2024 and whether it gains momentum from next year, other aspects condition the recovery of the common currency. From Bank of America, they exclude the scope of the parity between the two currencies. “Parity is not impossible, but it would be strange. Everything would have to go wrong and the situation would have to stay like this for a while,” commented the investment bank.
And there are other aspects that affect the crossover between the two currencies most used by the market and the most present in central bank reserves. THE evolution of European debt and the way in which the ECB reduces its balance sheet could condition the euro in the years to come. But also external elements such as a trade war in which the euro zone, the United States and China would be involved, where the euro could be damaged, according to Bank of America.
Meanwhile, gold maintains its momentum, hitting new all-time highs in the $2,670 per ounce area. With the increase of almost 30% in 2024the safe haven is also accelerating due to market euphoria which pushes aside “fundamentals in favor of the dollar and the expectation of a rate cut in the United States”, commented Carsten Menke, head of research at Julius Baer Next Generation. The expert does not rule out specific drops in the price of the precious metal due to market volatility, although he considers that investors will take advantage of these moments to increase the weight of gold.
