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Euro Extends Decline Against G-10 in Fastest Slide Since October - BLOOMBERG

FEBRUARY 07, 2023

(Bloomberg) -- The euro fell Tuesday for a fourth straight session, in its fastest slide since October, as investors built in expectations for a more hawkish Federal Reserve and pushed the US dollar higher.

The common currency dropped as much as 0.5% to 1.0669 against the dollar, the lowest level since early January. It weakened even more against other G-10 peers, including funding currencies like the Japanese yen and the Swiss franc.

“The EUR fall from grace has been indeed aggressive,” said Valentin Marinov, a strategist at Credit Agricole in London. “The euro has been the biggest long in the G10 FX and the underperformance against the dollar, Swiss franc as well as the sterling and yen reflects the unwinding of these longs.”

Investors have quickly revised higher the expected path for the Fed’s benchmark interest rate since Friday, following a stronger-than-expected monthly jobs report in the US. While the European Central Bank has also been raising rates — including a half-point increase last week, with more to come — the reassessment of US monetary policy is winning out in currency markets.

The euro should stabilize next month around 1.05 against the dollar, Marinov said.

That is the level where speculative accounts, which have trimmed long euro positions, are said to have buying interest, according to traders.

“It would take a more persistent euro-zone data weakness, dovish European Central Bank and wider peripheral spreads to justify a renewed downtrend in the euro,” Marinov said.

--With assistance from Robert Fullem.


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