Euro Surges to One-Year High as Traders Eye Rate-Cut Path
(Bloomberg) -- The euro rose to the highest level in one year against the dollar as currency traders bet US central bankers will reinforce the case for lower borrowing costs at the Federal Reserve’s Jackson Hole economic symposium.
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The euro gained as much as 0.4% on Wednesday to 1.1169, its strongest level since July 2023. The British pound also rose to the highest since last July as the dollar weakened broadly after minutes from the Fed’s most recent policy meeting, out on Wednesday, showed that several officials saw the case for interest-rate cuts.
The advances come amid expectations that Fed Chair Jerome Powell on Friday will support bets that the central bank will cut rates by more than the European Central Bank in the coming months. Growth concerns in Europe have supported the case for further interest-rate cuts by the ECB. Traders are poring over data to get guidance on the amount of monetary easing.
This month, the euro is up 3% on a softer dollar as traders ramp up bets on Fed rate cuts.
“Dollar weakness is pushing the euro,” said Yusuke Miyairi, a currency strategist at Nomura International Plc. “But the fundamentals in the euro area, especially the region’s growth, aren’t necessarily supporting this move higher.”
The euro-area manufacturing survey for July may come in softer than expected on Thursday, according to Nomura. It will be “an important test” for the euro, Miyairi said.
The Bloomberg Dollar Spot Index dropped to a session low Wednesday after the Fed minutes were released. Its been trading weaker earlier in the session since US payrolls were marked down by most since 2009 in the Bureau of Labor Statistics’ preliminary benchmark revision.
“After the weak July labor market data, the market is very alert to signs of weakness in the US,” said Kit Juckes, chief FX strategist at Societe Generale SA.
The euro may hold in the $1.10 to $1.12 range until the next US monthly payroll report in early September, he said.
--With assistance from George Lei.
(Updates with details on the euro, pound and FOMC meeting minutes.)
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