Euro fell in European trade on Monday against a basket of major rivals, sharpening losses for a second day against the dollar and plumbing a two-month trough amid mounting concerns about the rate gap between Europe and the US.
Now markets expect the European Central Bank to start cutting interest rates sooner than the Fed.
EUR/USD
EUR/USD fell 0.2% to 1.0767, the lowest since December 13, after losing 0.8% on Friday, the largest loss in a month following hot US labor data.
EUR/USD lost 0.6% last week, the third weekly loss in a row amid concerns about the rate gap between the ECB and the Fed.
Rate Gap
US stock indices settle near record highs ahead of Fed meeting
The current European-US rate gap stands at 100 basis points, the lowest since May 2022, and expected to widen to 125 basis points in April as the ECB is expected to cut rates.
European Rates
Following the European Central Bank’s last meeting meeting, the odds of an April interest rate cut surged to 80%.
US Rates
Conversely, following Federal Reserve Governor Jerome Powell’s bullish remarks recently dismissing the possibility of a March rate cut, the odds of such a move tumbled to just 17.5%.
The odds of a May Fed interest rate also slipped from 60% to 57.5%.
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