Euro declines as bets on interest rate cuts increase

The euro fell to its lowest level in more than three weeks on Thursday as traders increased bets that the European Central Bank will begin cutting interest rates starting in March 2024, while the dollar stabilized ahead of the release of important jobs data this week.

The euro fell 0.07 percent to $1.0757, reaching its lowest level since November 14. It fell 1 percent this week and is on track to record the largest weekly decline since May.

Traders are betting that there is an approximately 85 percent chance that the European Central Bank will cut interest rates at its March meeting, bringing the cut to approximately 150 basis points by the end of next year.

François Villeroy de Gallo, a member of the European Central Bank and head of the French Central Bank, told a French newspaper in an interview published yesterday, Wednesday, that the issue of lowering interest rates may arise in 2024.

“The decline in inflation is happening faster than we thought,” he added.

The European Central Bank will set interest rates next Thursday and is certain to keep them at the current four percent, although the focus will be on the statements of those responsible for forecasting interest rates.

The dollar recovered this month after falling three percent in November, as traders increased bets that other central banks would lower interest rates.

The dollar index, which measures the value of the US currency against six competing currencies, rose by 0.038 percent to 104.17 points, slightly below its highest level in two weeks at 104.23 points, which it touched yesterday, Wednesday. The index rose 0.9 percent this week and is on track to achieve its strongest weekly performance since July.

Yesterday, Wednesday, data showed that jobs in the US private sector increased less than expected in November, in another sign that the labor market is gradually calming down.

Investors will now focus on the non-farm payrolls data that will be released on Friday to get a clearer picture of the labor market.

The Canadian dollar fell 0.10 percent to 1.36 against the US currency after the Bank of Canada kept overnight interest rates at five percent yesterday. Unlike other central banks, the door was left open for another hike.

The Japanese yen rose 0.47 percent to 146.59 against the dollar and approached its highest level in three months at 146.23 against the dollar, which it touched at the beginning of the week.