Monthly Wrap: EUR – Euro weakens as ECB continues cutting interest rates 

Matthew Andrews October 3rd 2024 - 2 minute read

Key takeaways: 

– ECB rate cuts drive the euro lower 

– US dollar weakness cushions EUR 

– EUR monthly lows: £0.83, $1.10, AU$1.60, NZ$1.74, C$1.49 

– EUR monthly highs: £0.84, $1.12, AU$1.66, NZ$1.80, C$1.51 

The euro weakened over the past month, striking a 29-month low against the pound and multi-month lows elsewhere, as the European Central Bank (ECB) continued cutting interest rates. 

EUR initially enjoyed some support through early September, thanks to upbeat Eurozone economic data, including strong German factory orders and a rebound in Eurozone retail sales. 

A weaker US dollar also boosted the euro, due to EUR’s strong negative correlation with USD. 

However, the common currency fell against its stronger rivals during the second half of the month after the ECB cut rates for the second time this year. 

In addition, some downbeat Eurozone economic data began to put pressure on the euro as the month unfolded, with signs of a slowing economy boosting bets on more rate cuts to come. 

Persistent USD weakness cushioned EUR from steeper losses. However, a recovery in the US dollar at the very end of September put the common currency firmly on the back foot. 

October then kicked off with the Eurozone’s preliminary consumer price index for September. Inflation cooled below the ECB’s 2% target, further fuelling rate cut bets and weighing on the euro. 

Looking forward, the ECB’s next policy decision in the middle of October is the main event for EUR investors. If the central bank cuts interest rates again, the euro could face further losses. 

Eurozone economic data will also drive movement, with the bloc’s GDP growth rate for the third quarter perhaps the most anticipated release. Any evidence that the Eurozone economy is struggling could see EUR slide. 

Meanwhile, USD movement could continue to influence EUR. If Federal Reserve rate cut bets put pressure on the US dollar, the euro could enjoy some cushioning. 

Written by
Matthew Andrews

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