EUR/USD dropped 0.2% to 1.0835, following the release of eurozone business activity data for July
The U.S. dollar rose Wednesday, while the euro dropped after the release of disappointing eurozone activity data pointed to further ECB rate cuts ahead.
At 09:25 GMT, the Dollar Index gained 0.1% to 104.232, extending an overnight rebound.
The dollar has benefited from the volatility surrounding the U.S. political situation.
Vice President Kamala Harris was seen garnering strong support from the Democratic Party after her endorsement as its presidential nominee by President Joe Biden.
The dollar losses from the softer June CPI report have now been erased in most USD crosses, with JPY, CHF and GBP standing out as a few key winners, ING analysts said in a note.
Looking at the bottom of the forex scorecard, we sense the Trump trade is still very much at play, they added.
That said, Friday sees the release of U.S. PCE inflation numbers for June, and the Federal Reserve’s preferred measure of inflation could change forex sentiment quickly.
In Europe, EUR/USD dropped 0.2% to 1.0835, following the release of eurozone business activity data for July.
Growth in eurozone business activity stalled in July, with the HCOB’s preliminary composite PMI dropping to 50.1 this month from June’s 50.9, barely above the 50 mark that separates growth from contraction.
The ECB kept interest rates on hold at 3.75% last week, but further signs of slowing regional growth point to further rate reductions this year.
Markets are pricing in nearly two ECB rate cuts for the rest of the year.
GBP/USD traded 0.1% lower at 1.2898, dropping back from the 1.30 level that the pair saw last week for the first time in a year.
Data showed that British business activity rose this month, bolstered by the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023.
July’s S&P Global Flash Composite Purchasing Managers’ Index advanced to 52.7 from June’s six-month low of 52.3.
Elsewhere, USD/CAD gained 0.1% to 1.3796, near a three-month low for the Canadian dollar ahead of a Bank of Canada rate-setting meeting later in the session.
Markets are pricing in an 84% probability of a 25 bps rate cut, which would be the Bank of Canada’s second cut in as many months.
