The euro slipped 0.4% to $1.1122, recovering from losses of as much as 0.7% earlier in the session but still sliding from late August’s 13-month high
The euro dropped against the dollar on Monday as business activity readings painted a grim picture of the euro zone economy and fuelled bets on more interest rate cuts by the ECB this year.
The euro slipped 0.4% to $1.1122, recovering from losses of as much as 0.7% earlier in the session but still sliding from late August’s 13-month high that was driven by bets of faster U.S. monetary policy easing.
A survey compiled by S&P Global showed euro zone business activity declined this month as the bloc’s services industry flat-lined, while a downturn in manufacturing accelerated.
The data certainly keeps the door open to a rate cut in October – whether they step through that door, it is too early to say, but it is a pretty grim reading, said Kenneth Broux, head of corporate research, FX and rates at Societe Generale.
Traders now anticipate cuts of almost 44 basis points this year from the European Central Bank, compared with almost 38 basis points last week, implying that they expect a stronger probability of the central bank easing rates again in October.
The pound was almost flat at $1.3314, erasing its morning losses of nearly 0.5%, after a similar survey showed British businesses reported a slowdown in growth this month, though it was less severe than the euro zone figures.
Sterling hit its highest in more than two years against the dollar on Friday after the release of strong British retail sales data. The BoE kept rates unchanged last Thursday, with its governor saying the central bank had to be “careful not to cut too fast or by too much”.
