Euro Drops to Two-Month Low as ECB Rate Cut Approaches

The euro fell to a more than two-month low on Thursday ahead of an anticipated European Central Bank rate cut, while the dollar surged to its highest level in 11 weeks due to expectations that Donald Trump, whose policies are viewed as favorable by the market, will win the upcoming U.S. election.

The yen hovered near the critical 150 per dollar level, trading at 149.765.

Sterling gained slightly against the euro at 83.54 pence but remained close to Wednesday’s two-month low against the dollar, following disappointing UK inflation data.

Weak economic indicators from the euro area and dovish remarks from ECB officials have led traders to anticipate the ECB’s third rate cut since June, diminishing the euro’s attractiveness.

The ECB is set to announce a quarter-point cut to its deposit rates at 1215 GMT, followed by a news conference with President Christine Lagarde, where future monetary policy hints will be closely analyzed.

Money markets are pricing in three additional rate reductions through March 2025 to address the eurozone’s persistent inflation.

The euro slipped 0.1% to $1.085325, marking its seventh consecutive decline.

In contrast, the dollar climbed to an 11-week high against a basket of currencies at 103.65, bolstered by positive U.S. economic data and reduced expectations for Fed rate cuts, along with increasing likelihood of a Trump victory, which analysts believe could further strengthen the dollar and pressure bonds.