The euro dropped sharply against the U.S. dollar on Monday, following business activity data that painted a grim picture of the Eurozone economy. This has fueled speculation that the European Central Bank (ECB) might cut interest rates again later this year.
Euro Declines Against the Dollar
The euro fell by 0.6% to $1.1096, marking its largest one-day drop in over three months. The currency has been moving away from its 13-month high, which it reached in late August, due to expectations of a faster monetary easing in the U.S.
Business Activity Slows in the Eurozone
A survey conducted by S&P Global revealed that Eurozone business activity contracted at an unexpectedly sharp pace this month. While the dominant services sector remained stable, the manufacturing sector saw an accelerated slowdown.
The data highlighted worsening economic conditions in Germany, the Eurozone’s largest economy, and indicated that France had returned to contraction after a temporary boost in August, partly due to the Olympic Games.
Dollar Strengthens
The U.S. dollar index, which measures the dollar’s performance against six major currencies, rose by 0.4% to 101.13, remaining above its one-year low hit last week.
British Pound and Business Data
Meanwhile, the British pound fell by 0.3% to $1.3281 but recovered slightly from its session low. Data showed that British companies experienced slower growth this month, but the decline was less severe compared to the Eurozone.
The pound had reached a two-year high against the dollar on Friday, following strong UK retail sales data. The Bank of England recently kept interest rates unchanged, with its governor cautioning against cutting rates too quickly or by too much.
Yen and Dollar Movements
The U.S. dollar declined against the yen during thin trading due to a holiday in Japan. The dollar had hit a two-week high of 144.50 yen last week, after the Bank of Japan kept interest rates unchanged and indicated it wasn’t rushing to raise them again.
This decision came shortly after the U.S. Federal Reserve’s 50 basis point rate cut, ending a strong run for the yen, which had gained 1.5% since the start of September.
Bitcoin Reaches Monthly High
Bitcoin climbed 0.4% to $63,500 after briefly reaching a monthly high of $64,730 earlier in the session.
