Euro slides to three-week low as dollar jumps on Fed rate repricing

Tuesday,   09-Jul-2019   03:57 PM (IST)

The euro dropped to a three-week low against a broadly stronger dollar on Tuesday as investors re-assessed their expectations of how much the Federal Reserve may cut interest rates this month. The common currency fell to a low of $1.1206, its lowest since mid-June. The dollar index, which measures the greenback against a basket of rival currencies, rose 0.1% to 97.488, a three-week high. Expectations of a 50-basis-point cut have reduced to 5.9% from a 25% chance seen last week. Investors also think there is a higher chance the Fed will not cut rates at the September meeting. Still, money markets are pricing in a 94% probability of a 25-basis-point rate cut at the Fed meeting on July 31, according to CME Group’s FedWatch tool. A week ago, they saw a 75% chance of a cut. Fed chief Jerome Powell’s comments during two days of testimony to Congress beginning on Wednesday will be watched to determine whether traders will continue to reduce bets for deep interest rate cuts. Elsewhere, a rising dollar pushed the British pound down to a fresh six-month low of $1.2480, the lowest since the "flash crash" on Jan. 3 when the pound dropped to $1.2409.