Traders bet on the Fed outpacing the ECB in rate cuts, causing the Euro to soar to a one-year high

Zhitong
2024.08.21 23:23
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Forex traders bet on the Fed rate cut, pushing the euro to a one-year high against the dollar. On Wednesday, the euro rose 0.4% to 1.1169, while the pound also hit a new high. The Fed's policy meeting minutes cited reasons for the rate cut, leading to a general weakening of the dollar. Traders are watching for upcoming data releases to gain insights into monetary policy, with the expectation that the dollar will fluctuate in the 1.10 to 1.12 range against the euro

Zhitong Finance APP learned that as forex traders bet on the Fed Chairman emphasizing the reasons for lowering borrowing costs at the Jackson Hole Economic Symposium, the euro rose to its highest level in a year against the dollar.

On Wednesday, the euro rose 0.4% to 1.1169 against the dollar, reaching its highest level since July 2023. The pound also rose to its highest level since July last year as the latest Fed policy meeting minutes released on Wednesday showed that several officials believed there were reasons to cut interest rates, leading to a general weakening of the dollar.

This trend emerged as the market expected Fed Chairman Powell to support bets that the Fed's rate cuts over the next few months will exceed those of the European Central Bank. Concerns about European economic growth have supported further rate cuts by the ECB. Traders are carefully studying data to gain insights into the extent of monetary easing.

This month, as traders increased their bets on Fed rate cuts, the dollar weakened, and the euro rose 3% against the dollar.

Yusuke Miyairi, a strategist at Nomura International, said, "The weak dollar is pushing up the euro. However, the fundamentals of the eurozone, especially its growth, do not necessarily support a higher euro."

Nomura stated that the eurozone's manufacturing survey results for July, to be released on Thursday, may be weaker than expected. Miyairi said this would be an "important test" for the euro.

After the release of the Fed meeting minutes on Wednesday, the Bloomberg Dollar Spot Index fell to a daily low. Following the largest drop in US employment since 2009 in the preliminary benchmark revision by the US Bureau of Labor Statistics, the dollar index remained weak in early trading.

Kit Juckes, Chief FX Strategist at Societe Generale, said, "Following the soft July labor market data, the market is very alert to signs of weakness in the US."

He said that until the next monthly US employment report is released in early September, the euro against the dollar may remain in the range of 1.10 to 1.12

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