The long euro’s rally has ended abruptly this week as the currency posted a sharp drop, demonstrating the biggest loss since July 2012 against the US dollar. Moreover, the future of the currency looks bleak as the European Central Bank may cut interest rates.
The euro started the week poorly from the very beginning as it was struggling to stay above the important psychological level of 1.3800 against the dollar. But the major collapse of the shared 17-nation currency has happened as traders started to speculate about an interest rate cut by the ECB. The resulting weakness persisted till the weekend.
The softness of the euro was also a result of the dollar’s strength. As was expected, the US currency did not extend its losses. On the contrary, the greenback surged after the policy statement of the Federal Reserve came out less dovish than was expected and speculations about quantitative easing tampering resurfaced.
EUR/USD sank from 1.3806 to 1.3448 this week, reaching the lowest settlement since September 26. EUR/JPY dropped from 134.92 to 133.21. EUR/GBP retreated from 0.8538 to 0.8470 after reaching the weekly high of 0.8583 — the strongest rate since August 29.
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