In the battle of the two most used currencies in the world, the dollar has gained ground in recent days against the euro, which is currently at levels of two months ago in its exchange rate with the euro. dollarat the level of 1.095, with a drop from year highs of 2%.
This annual peak was reached at the end of August, at 1.1192 euros per dollar, which were also the maximum levels of the last five yearss. These movements fluctuate according to rate cuts made by central banks (in a context where only cuts are expected), or their expectations.
This is why the reduction in the possibility of lowering interest rates in the United States in recent days has encouraged the dollar, which has gained 0.8% since January 1 against the euro. In fact, the index Dollar Square which brings together Bloomberg, which compares the performance of the ten most important currencies in the market against the US currency, also rebounded to the levels of early August.
This lower expectation of a rate cut by the American Federal Reserve (Fed) goes hand in hand with data such as employment, released last week. A better than expected figure (254,000 new non-farm jobs were created last month, well above the 150,000 expected) has outpaced the idea of executing a new giant cut (of 50 basis points) by the bank central. The probability of a cut of between 50 and 75 basis points, considered last week, now becomes 50 basis points for the rest of the year. However, expectations for the eurozone remain unchanged, with a cut of 50 basis points until the end of 2024.
“Chinese stimulus measures could help improve euro news, but they may not be a long-term game-changer, and euro bulls are increasingly at the mercy of a domestic economic recovery,” says Bloomberg Intelligence.
And added: “A euro/dollar scenario of between 1.10 and 1.15 dollars at the end of the year remains achievable, but our conviction is weakening, given that our supposed rebound in euro activity “As for European exposure, we still prefer the Swiss franc or the pound sterling.”
