Skip to content EURUSD Fundamental Analysis – 8-October-2024
The Euro recently fell below $1.098, its lowest point since mid-August. This decline is mainly due to the differing approaches to monetary policy between the European Central Bank (ECB) and the US Federal Reserve (Fed).
The daily chart below shows the EUR/USD rate as of this writing.
Eurozone Growth and Inflation Challenges
The Eurozone is facing challenges in terms of both growth and inflation. In September, inflation fell below the ECB’s 2% target, indicating economic momentum is slowing.
This has led many to believe that the ECB could cut interest rates again in their October meeting for the third time this year. Lower interest rates often lead to a weaker currency, making investments in that currency less attractive to international investors.
ECB’s Possible Rate Cut and Its Impact
ECB officials, including Christine Lagarde, have supported further rate cuts to boost the economy. A potential rate cut is seen as a tool to stimulate economic activity by making borrowing cheaper, which can encourage spending and investment. However, such a move also puts pressure on the Euro, pushing its value down compared to other currencies like the US dollar.
Meanwhile, the US dollar is gaining strength due to a strong US jobs report. This report lowered the chances of the Fed making a large rate cut anytime soon. With fewer expectations of a rate cut, the US dollar became more appealing to investors, weakening the Euro.
Final Word
In summary, the Euro’s recent dip can be attributed to the contrasting policies of the ECB and the Fed. While the ECB is leaning toward cutting rates to support the slowing Eurozone economy, the Fed’s focus on robust US economic data is helping the dollar remain strong.
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