Dollar touches 2-week high, euro soft as traders bet on Q1 rate cuts
Business
Dollar touches 2-week high, euro soft as traders bet on Q1 rate cuts
LONDON (Reuters) - The U.S. dollar touched a two-week high on Wednesday, while the euro was weak across the board as markets ramped up bets that the European Central Bank will cut interest rates as early as March.
The euro was down 0.2% against the dollar at a three-week low of $1.0773, as markets adjust rate expectations lower following soft data and dovish central bank commentary.
The single currency also touched a three-month low against the pound , a five-week low versus the yen and a 6-1/2 week low against the Swiss franc .
"The story in currency markets is mostly about a softer euro," said Niels Christensen, chief analyst at Nordea.
"Yesterday's comments from ECB's Schnabel supported the market view of early rate cuts."
Influential policymaker Isabel Schnabel on Tuesday told Reuters that further interest rate hikes could be taken off the table given a "remarkable" fall in inflation.
Markets are now placing around an 85% chance that the ECB cuts interest rates at the March meeting, with almost 150 basis points worth of cuts priced by the end of next year.
The ECB will set interest rates on Thursday next week and is all but certain to leave them at the current record high of 4%. The Federal Reserve and Bank of England are also likely to hold rates steady next Wednesday and Thursday respectively.
Fed officials are now in a blackout period ahead of the Dec. 12-13 meeting, where a key focus will be the updated projections of where they see rates in 2024.
