Monthly Wrap: EUR – Euro strikes multi-month lows amid ECB rate cut bets 

Philip McHugh February 8th 2024 - 2 minute read

Key takeaways: 

  • EUR falls as investors bet on rate cut in April 
  • Eurozone avoids recession in 2023 
  • EUR monthly lows: £0.85, $1.07, AU$1.62, NZ$1.75, C$1.44 
  • EUR monthly highs: £0.86, $1.09, AU$1.66, NZ$1.79, C$1.47 

The euro fell against most of its rivals over the past month amid expectations that the European Central Bank (ECB) could start cutting interest rates in April. 

Through January, weak economic data from both the Eurozone and Germany put pressure on the single currency, raising concerns that the bloc possibly slipped into a recession in 2023. 

The ECB’s interest rate decision then saw EUR tumble at the end of the month. Although ECB President Christine Lagarde tried to push back on rate cut bets, investors picked up on a change in the bank’s language implying that rate cuts would soon be considered. 

In the wake of the decision, dovish comments from some ECB officials saw EUR hit multi-month lows. Two policymakers suggested that a rate cut was possible as early as April. 

The euro managed to rally after Eurozone GDP beat forecasts to print at 0% in the fourth quarter of 2023, showing that the bloc swerved a recession. 

However, downbeat economic data kept EUR subdued in early February, although the single currency did trend higher against its weaker, riskier rivals amid a souring market mood. 

Looking forward, the second estimate for Eurozone GDP growth in Q4 2023 is the first major release in focus. If the data is revised down to show a contraction, EUR could slide. 

The preliminary PMI results for February are due out towards the end of the month. The single currency could face fresh headwinds if business activity continued to contract. 

Attention then turns to the Eurozone’s latest consumer price index, set to be published at the start of March. Another cooldown in inflation could see EUR test new multi-month lows. However, a stronger-than-expected reading would likely see the euro rally. 

Written by
Philip McHugh

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