Euro is under pressure against the US dollar
On Thursday, the euro lost the ground it had made the day before. In the afternoon, the lowest value of the common currency was 1.0114 US dollars. It was still over $1.02 in the morning. The reference rate was set by the European Central Bank (ECB) at 1.0122 dollars (Wednesday: 1.0152 dollars). So, it cost 0.9880 (0.9850) euros to buy a dollar.
Weak economic news from the United States didn’t hurt the dollar for very long. In the spring, the US economy slipped into a recession. After a drop in economic output at the start of the year, the gross domestic product (GDP) fell by 0.9% in the second quarter, which is the same as saying it fell by 0.9% for the whole year. Since the US economy shrank by 1.6% on an annualized basis in the first quarter, a technical recession has happened.
The US Federal Reserve may not raise interest rates as much as some people thought they would. The chief economist at VP Bank, Thomas Gitzel, thinks that the US central bank will not be bothered in the meantime. Due to the high inflation, he thinks that interest rates will go up even more. “However, because construction investments are going down, there shouldn’t be a 0.75-point rate hike in September.” When interest rates are high, a currency tends to stay strong.
Wednesday was the last time the Fed raised rates by 0.75 percentage points. But the dollar was still being pushed down. The dollar fell because of what Jerome Powell, the head of the US Federal Reserve, said. He said that rates would go up even more. But Powell said that the future course would depend on how the economy changed.